Morris Manning & Martin, LLP

Does Cold-Calling Curb Competition?

10.28.2010

September 24, 2010, the U.S. Department of Justice (“DOJ”) filed suit against six high-tech companies - Adobe Systems, Apple, Google, Intel, Pixar, and Intuit - charging that their agreements to refrain from “cold calling” each other’s employees for employment are illegal under federal antitrust law.  The DOJ asserted that such non-solicitation agreements restrained competition for employees and likely deprived employees of competitively important information and access to better job opportunities.

The DOJ characterized non-solicitation agreements as “illegal per se,” or automatically illegal.  While the lawsuit focused on high-tech labor, the DOJ suggested that its views are not necessarily limited to that market, and that it “continues to investigate other similar no solicitation agreements."

Importantly, the DOJ recognized that non-solicitation agreements may be appropriate in certain circumstances:

  • a Company’s non-solicitation agreement with its own employees.
  • non-solicitation provisions for mergers or acquisitions (whether or not consummated), including in related due diligence.
  • non-solicitation provisions with consultants or recruiting agencies.
  • non-solicitation agreements reasonably necessary for legitimate collaboration agreement, such as joint development, technology integration, joint ventures, and teaming agreements.

Companies should review their contractual arrangements with other companies to make sure they are legally compliant.  This should include a review of any non-solicitation provisions that might be viewed by the DOJ as anti-competitive.