Agreement Not to Compete Antitrust

Fortunately, the issue of non-competition law has become national news in recent years. Several States have adopted reforms that severely restrict the use of non-compete obligations. And the German government has taken up the issue of non-competition clauses, antitrust law and labour market agreements. The time has therefore come to move from antitrust law as a defence to the application of the Non-Competition Act and to prosecute companies that abuse non-compete obligations under Section 1 of the Sherman Act. A recent confluence of federal antitrust enforcement, state law, and the Biden administration`s focus on labor markets has led many companies to reconsider both their antitrust and human resources (HR) compliance efforts, as well as existing policies, agreements, and clauses on non-compete and solicitation clauses. Does the non-compete obligation unduly restrict the type of activity that a former employee can undertake, so that it makes it excessively difficult for the employee to exercise his livelihood or the profession he has chosen and/or unduly harms or penalizes the employee or the consumer/public? The employee works for the company. The employee is therefore vertically within the company. A ban on workers therefore constitutes a vertical restriction. review the current status of non-compete obligations and the legal analysis of their enforceability; In January 2021, the DOJ`s antitrust division filed its first antitrust complaint with the Trump administration, involving allegations that a health care provider had entered into a "no-poaching agreement" with horizontal competitors in which the companies involved agreed not to recruit senior executives from each other.20 On July 15, 2021, The Antitrust Division of the Biden administration`s Justice Department has received two more indictments against two other alleged co-conspirators in the same investigation. a company and a former CEO.21 Such restrictions have a clear and harmful purpose: to eliminate competition and lower wages. Viewing these restrictions in themselves as violations of antitrust laws does not require a massive leap in logic or analysis.

It is enough for a federal judge to come to the obvious conclusion that non-competition clauses between janitors, factory workers and other low-wage workers are completely illegal. Even if the courts are not prepared to make such a decision at the application for dismissal or summary judgment, they should do the best thing to do: postpone the verdict until after the trial. Yes, many courts have postponed the decision on the case until the hearing. Despite their different positions, the two Commissioners cited the legislative policy of the Federal Government and the Länder on non-compete obligations. These efforts include a federal bill introduced by Senators Chris Murphy (D-CT) and Todd Young (R-IN) – the Labour Mobility Act – that would eliminate the use of non-compete clauses in employment contracts, with a few exceptions to break partnerships and sell businesses. "Non-compete obligations stifle wage growth, career advancement, innovation and business creation," said Senator Young. "A comprehensive reform of the non-compete obligation will empower our workers and entrepreneurs to freely use their talents where their skills are most in demand." In a recent article, we provided some do`s and don`ts for employers who plan to use non-compete clauses to protect their legitimate business interests. Overall, employers must meet several requirements for a non-compete clause to be enforceable in Florida (an employer-friendly state). In addition, the executive order "encourages" the Attorney General and the FtC President to "consider revising the October 2016 Antitrust Guidelines for Human Resources Professionals"3, which were intended to prevent antitrust violations in employee hiring and compensation decisions.4 For many years, federal antitrust authorities have not vigorously enforced antitrust law against employer-to-employer non-poaching agreements. Competitors. Pursued.

This changed about 10 years ago when the antitrust division investigated a number of "high-tech" companies for anti-competitive non-poaching deals and sought civil consent orders and settlements against a number of them.15 The main reason for these requirements is to ensure that employers are able to compete in a fair economic environment. Otherwise, non-compete obligations could often be considered a violation of state and federal antitrust laws. The general objective of antitrust law is to prevent anti-competitive measures by undertakings exercising significant control over the market. Professional associations made up of competitors can offer their members significant services and benefits that improve efficiency and reduce costs. These services and benefits can range from general industry promotion to high-tech support. However, if an association of competitors denies these benefits to potential members who offer a competitive alternative that consumers want, the restriction can affect competition and keep prices high. This problem only occurs when association members have a significant presence in the market and it is difficult for non-members to compete without access to association-sponsored services. The legal landscape of the applicability and acceptable scope of non-compete obligations and other restrictions on labour mobility continues to change, in some cases dramatically. The Department of Justice clearly considers the use of naked non-poaching agreements to be illegal in itself, and some states prohibit non-compete clauses. In addition, companies are facing increasing uncertainty about the limitations of contractual practices and provisions that can be routine for many. Enter the decree of July 2021.

The July 2021 decree does not necessarily suggest that the standard and criminal liability that agencies seek against horizontal no-poaching agreements from employer to employer should be applied to vertical non-compete obligations between an employer and an employee. But the Executive Order on Employer-Employee Non-Competition appears to be an extension of the DOJ/FTC`s employer-employer-non-poaching approach, as it aims to promote competition in labor markets by similarly establishing a single, unified rule at the federal level – the scope and scope of this rule is not yet entirely clear. In some jurisdictions, there is an incredible judicial bias in favour of non-compete obligations and non-compete obligations. That is completely inappropriate. In my view, this has three main causes: is the non-compete obligation formulated narrowly enough to protect only the legitimate business interests of your company (e.g. B prevent advertising by customers or employees or restrict the disclosure and use of trade secrets and confidential information) for a reasonable period of time? In early January, the FTC held a public workshop to determine whether the FTC should adopt a rule to restrict the use of non-compete obligations in employer-employee employment contracts. Two of the FTC`s five commissioners – Rebecca Slaughter and Noah Phillips – made prepared remarks. Commissioner Slaughter, a Democratic representative of the FTC, called on the FTC to use its rule-making power to restrict "unjustified and anti-competitive non-compete obligations" in employment contracts.

"The workshop we are hosting today is a valuable mechanism for the FTC to gather information and learn more about the impact of non-compete obligations on businesses, workers and the economy," Slaughter said. "But gathering information should not be the end of this exercise; We should also take action," she said, citing efforts by state and federal lawmakers and proposals to limit anti-competitive use and enforcement. .