Restrictions on Employee Change of Jobs: Antitrust Challenges to "Non-Compete" and "No-Poach" Clauses

"2 Courts that consider the legality or reasonableness of challenged restraints of trade analyze them under the so-called "rule of reason" analysis, or apply automatic illegality or per se treatment to them.3 Under the rule of reason, a court looks at various factors, including the history of the challenged restraint, and weighs the anticompetitive effects in a properly defined market against the procompetitive justifications for business practice at issue.4 By contrast, per se treatment condemns as a matter of law a business practice without consideration of any anticompetitive effects or procompetitive justifications.5 Per se treatment is reserved for a limited category of business practices that always, or nearly always, are harmful to competition, meaning that, on their face, they lead to higher prices or reduced output or lessened innovation.6 Price-fixing, bid-rigging, and customer or market allocation schemes are typical examples of business conduct that has been treated as per se illegal under section 1.7 In terms of enforcers, federal antitrust law relies on a system of dual enforcement. Under the Clayton Act, a private plaintiff can sue for damages- that are automatically trebled-and injunctive relief, as well as recover attorneys' fees and costs.8 In a conspiracy case under section 1, which employment cases have been historically, liability is joint and several with no right of contribution.9 Thus, the potential civil antitrust exposure in a private antitrust lawsuit can be significant. For years, in evaluating whether certain information exchanges among competitors violate the antitrust laws, antitrust enforcers and private antitrust litigants have considered whether communications among competitors concerning employment may constitute an anticompetitive information exchange.10 However, in recent years, the frequency and intensity with which employment-related agreements-either not to "poach" a rival's employees or to suppress wages, benefits, and other terms of employment within an industry-that have been challenged under the antitrust laws have increased dramatically.11 Correspondingly, private and public enforcers have treated these agreements more severely, alleging that per se, rather than rule of reason, treatment is appropriate and (now according to the federal regulators) that they constitute criminal, rather than civil, violations of antitrust law. A.In-formation Exchanges or Sharing In 2001, in Todd v. Exxon Corp., the Second Circuit-