Antitrust Implications of Noncompete and Nonsolicitation Agreements

Description

Antitrust authorities are increasingly scrutinizing noncompete provisions in employment agreements and other contracts. Because employment noncompetes limit where an employee can work, the employee may challenge these clauses as an unreasonable vertical restraint under the Sherman Act. Nonsolicitation or no-poaching agreements between service contractors and competitors may present additional antitrust issues.

The FTC and DOJ released its Antitrust Guidance for Human Resource Professionals in 2016, indicating the DOJ will conduct criminal investigations of competitors that agree to fix wages or other terms of employment or agree not to recruit another company's employees. Companies that compete for similar employees may be deemed "competitors" regardless of their business models.

To help minimize antitrust scrutiny, employers' use of noncompetes should confer some pro-competitive benefits. Employers should generally avoid entering into noncompete agreements with employees without access to sensitive information or specialized knowledge or skills. Any noncompete agreement should be tailored to the employer's specific circumstances and should further a legitimate business interest.

Companies may wish to carefully tailor (or avoid) nonsolicitation agreements with departing employees, service providers, and other potential competitors to avoid any appearance of collusion, which might give rise to antitrust liability.

Listen as our authoritative panel examines the antitrust issues that can arise from the use of noncompete and nonsolicitation agreements. The panel will also offer practical advice on when such agreements are appropriate and how they should be crafted to avoid antitrust scrutiny.