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Harsh Consequences Possible for "No-Poach Agreements"

Companies and individuals, such as HR professionals might face harsh criminal fines and jail sentences if they agree not to solicit or "poach" employees from other companies, especially in fast food franchise sector.

Recently, State Attorneys General from 11 states created a coalition to investigate anti-poaching agreements in franchise contracts. Some fast food franchises were asked to provide information about their practices and current contracts with no-poach provisions.

This is by no means a new development. In October 2016 US antitrust enforcement agencies focused on no-poach agreements and even issued a warning that agreements among companies—even companies that do not sell competing products, but merely compete for employee talent—would be treated as criminal antitrust violations.

In April 2018, the US Department of Justice filed its first enforcement action since these guidelines were issued.

At the same time, the Hong Kong Competition Commission issued an advisory warning businesses not to engage in agreements relating to hiring employees, such as agreeing not to “poach” each other’s employees. Other jurisdictions signaled an increased interest in taking down these practices.

As of now, many franchises decided to remove these provisions from their contracts. However, this alone does not eliminate all the associated risks. Have your attorney review your contracts for any no-poach provisions and discuss the next steps. The Department of Justice can provide immunity from criminal antitrust enforcement, subject to several provisions, if the conduct is voluntarily disclosed in a timely manner.



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