“No Poaching”: The Hunt for Risky Agreements in an Effort to Protect Your Business

A “No Poaching” agreement has nothing to do with violating hunting laws.  “No Poaching” agreements are similar and can sometimes be confused with Non-Compete agreements between competing entities or employees of those entities.  While the amount of restriction on Non-Compete agreements varies depending on location, true “No Poaching” agreements are illegal. 

A recent class action lawsuit highlights the importance of reviewing any restrictive agreements that business owners have with their employees.  Ramsey v. H&R Block, Inc., W.D. Mo., No. 4:18-cv-00933-ODS, complaint 11/23/18.  The claims brought against H&R Block allege that its “No Poaching” agreements substantially affected interstate commerce and caused antitrust injury throughout the country.   Essentially, the franchise agreements contained policies not to solicit or recruit each other’s personnel without prior approval.  The agreements were put in place throughout the country, affecting H&R Block’s approximate 10,000 locations that are both corporate owned and franchise owned and the approximate 70,000 employees.  These establishments, according to the complaint, were meant to compete against each other.  Because of this, any employee who left could not seek employment where they were most valuable, other H&R Block locations.   Furthermore, the employees had no clue that the franchise agreement contained a clause that prevented them from being hired by another competing entity until the other H&R Block locations refused to speak to them. 

The Sherman Act states that every contract, trust, or conspiracy that puts a restraint on trade is illegal.  15 U.S.C. § 1.  It also prevents monopolizing or attempts to monopolize any part of trade or commerce by making it a felony.  15 U.S.C. § 2.   A “No Poaching” agreement violates the Sherman Act because it puts a restraint on competition in the market for employees and, according to the complaint in Ramsey, “artificially suppresses wages.” 

So, if the lawsuit, which is in its beginning stages, ends with a court finding that the Sherman Act was violated, what could happen to H&R Block?  One consequence could be a fine of up to 10 million dollars … per violation.  Ouch.  Something else available under the Act is treble damages, which is damages three times the amount of the injury can be claimed.  Another ouch.

If you would like a review of any restrictive clauses in any agreement your business is involved in, contact an experienced attorney at Goosmann Law Firm in Sioux Falls, Sioux City, or Omaha today.