No-hire agreements clauses between companies have been around for a long time, and they’ve been surrounded by controversy the entire time. It’s a topic that today’s tech workers have become familiar with, but what about employees outside of tech? How far can your employer go to dissuade you from being lured elsewhere?
You may recall back in 2015 when Apple, Google and other tech companies settled an antipoaching lawsuit for $415 million because of the no-hire agreement. “The lawsuit shed a light on the practice of some major tech industry players of allegedly working together to agree not to poach employees from each other,” CNET reported at the time. It was an eye-opener for tech workers, but few outside tech or other white-collar careers felt they could relate to such tactics.
But there’s a new non-tech case regarding no-hire agreements that has Burger King, well, flame-broiled. The case about the Burger King’s no-hire agreement has been revived by the 11th U.S. Circuit Court of Appeals in Florida and alleges that a Burger King Corp. (BKC) franchise agreement circa 2010 to 2018 included a provision that provided, in part, that “[n]either BKC nor franchisee will attempt … to entice or induce, or attempt to entice or induce any employee of the other or of another franchisee of BKC to leave such employment, or employ such employee within six months after his or her termination of employment with such employer, except with the prior written consent of such employer.”
But aren’t franchisees on the “same team” regarding this no-hire agreement/clause between companies? Not necessarily when it comes to employees, the court concluded, saying that “there’s just no question that Burger King and its franchisees compete against each other and have separate and different economic interests.”
SHRM sums up the lesson this way: “In the current labor market, it may be tempting for competing businesses to enter into informal agreements or understandings to prevent staff departures, as well as rehiring of former employees. However, it is not uncommon for federal and state regulators to investigate no-hire arrangements that may implicate the Sherman Act or similar state antitrust statutes.”
What’s the Sherman Act? It’s formally called the Sherman Anti-Trust Act of 1890 (remember when we said the controversy around no-hire agreements has been around for a long time)? You can read more about it here. The act was cited in the tech anti-poaching case, it’s being invoked in this Burger King case, and it has been used as grounds in countless cases against no-poach, non-solicit, and no-hire agreements. In a July 2022 statement addressing a case against a group of competing trucking companies, the U.S. Department of Justice’s Antitrust Division issued a scathing review of no-hire agreements clause between companies. Similar to plaintiffs in the tech case, plaintiffs against the trucking companies asserted that not only did the agreements make it difficult to change jobs, but the practice was also a way for the competitors to conspire to suppress wages.
Aside from the Sherman Act at the federal level, states may also throw shade at no-hire agreements. Texas, certainly, among them. But the agreement can be tricky to spot and define. (No employer is going to tell you, “Hey, here, please sign this no-hire agreement so we can prevent you from working elsewhere.”) And don’t confuse no-hire agreements with non-compete agreements, which are more widely accepted in the Lone Star State (as long as they’re worded carefully). The Federal Trade Commission would like to change that and make non-competes illegal, but that’s another blog post.
If you see language in an employment agreement that seems like it could be in the category of no-hire agreement/clause between companies, feel free to ask questions: of HR, your recruiter, or perhaps even an employment attorney.
