Poaching Laws: Good for Elephants, Bad for the Uninformed Employer
Posted on Jul 31, 2018 on Employment-at-Will / Restrictive Covenants, Legal Updates by
Lawyers suing each other is always entertaining, but when it’s about employment issues, we take note. Very recently, Selendy & Gay, a newly-formed law firm, filed a lawsuit against Quinn Emanuel Urquhart & Sullivan, LLP for allegedly violating U.S. antitrust law governing employee poaching (one employer taking employees from another employer).
When the soon-to-be Selendy & Gay partners notified their current employer Quinn Emanuel of their plans to form their own law firm, the partners at Quinn Emanuel were understandably concerned about the defecting partners hiring Quinn Emanuel associates. John Quinn, the named partner of Quinn Emanuel, allegedly said in an email: “The issues to be faced will be resolved a lot—A LOT—easier if you don’t hire any of our people. It will not be well received at all if you hire any of our people.”
He later reiterated this sentiment by allegedly emailing: “The single most important thing you could do is agree not to poach any of our people . . . . But you know we were already very short of associates and that remains true. I would extend myself to make sure everything goes more smoothly if you wouldn’t hire our people.”
Further requests were allegedly made verbally by other partners “not to hire away the best and the brightest.” Internal agenda items created by the Quinn Emanuel partners included “Associate poaching” and “Staff poaching.”
Mr. Quinn’s position is understandable. His firm expended considerable resources to train these employees. He doesn’t want another firm to profit from his work. In fact, he’s not alone. Tech giants like Google have gotten in trouble for similar behavior.
The law does not allow distinct employers to agree not to compete with each other for employees, even if it is in an effort to reduce costs. Even an informal, unwritten agreement is illegal. The poaching laws exist because the government believes that “competition among employers helps actual potential employees through higher wages, better benefits, or other terms of employment,” as the guidance available on the Department of Justice (DOJ) website provides.
Note these poaching agreements are different from restrictive covenants, such as agreements not to solicit employees. Restrictive covenants are between employers and employees while the poaching agreements contemplated by the Department of Justice are between employers. The antitrust laws and the Department of Justice’s no-poaching rules are aimed at these employer-employer agreements.
The repercussions for a violation of the antitrust laws are strict and severe. Individuals can bring civil suits against violators. The Department of Justice Antitrust Division and the Federal Trade Commission (FTC) can also bring civil and even criminal lawsuits.
This affects not only law firms, but every industry. In 2015, tech giants Apple, Google, Intel, and Adobe had to pay $415 million for their roles in a no-poach pact in which they agreed not to recruit each other’s’ employees. This affected approximately 64,000 employees. Even competing universities who agree informally not to recruit each other’s faculty would be held liable under this law.
The fact that major law firms and massive companies like Google and Apple have all faced these issues shows how easy it is to run afoul of these laws. As an employer, you must avoid agreeing with other employers not to poach employees. We will keep you posted as the Selendy & Gay case against Quinn Emanuel continues, and what repercussions may follow from the DOJ and the FTC.
Brody and Associates regularly provides counsel on civil rights issues and employment laws in general. If we can be of assistance in this area, please contact us at firstname.lastname@example.org or 203.454.0560.
Kelly E. Elder contributed to this article. The authors wish to thank Kelly for her efforts. Kelly is a law student at George Washington University. Her anticipated date of graduation is May 2019.