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Do Tech Company Agreements Not to Poach Violate Antitrust Laws?

For those who work in Silicon Valley, it seems that most high-tech companies are perpetually engaged in a talent war for top engineers, marketers and executives. So why is the Department of Justice investigating prominent technology and biotech companies, including Google and Apple, for antitrust violations associated with their hiring practices?

According to The New York Times, despite outward appearances, there's apparently a "gentleman's understanding" in Silicon Valley not to poach their competitors' employees. Though employees are free to look for work anywhere, companies will not actively recruit from each others' ranks. And that's what concerns the Department of Justice, because the lack of competition for employees could restrict movement in the job market and depress wages.

Several recruiters confirmed that it is commonplace for companies to maintain a list of other companies that are off limits to recruiters. But a decision by one company not to recruit from another does not, on its own, violate antitrust law. Rather, as Carr & Ferrell of counsel Gary Reback explains, it's when two or more companies agree or collude with each other to steer clear of each others’ employees that antitrust concerns are triggered.

Barry Barnett, of Blawg Letter, points out that there's a possible motive for companies to collude to avoid poaching. He explains:

California law casts a gauzy eye on noncompetes and claims of trade secret theft, and we've heard more than once that the ease of stealing employees in the Golden State has helped start-ups and others rush new products to market. That comes close to sounding like a motive for collusion.

On the other hand, TechDirt expresses some skepticism about the claims, noting that companies that agreed not to poach would only be hurting themselves. Moreover, the post points out that, "on the whole, it does seem like there's an awful lot of movement between big name companies."

Posted by Carolyn Elefant on June 4, 2009 at 03:26 PM | Permalink | Comments (0)


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