March 13, 2025
Rolling the Dice on No-Hire Agreements – The Courts & FTC May Not Agree
You invest precious time and money into recruiting, hiring, and training your employees. Can you protect that investment by agreeing with other employers to not hire one another’s employees?
It depends! You’ve likely read one or more articles about how a number of federal agencies have found such agreements violate federal antitrust laws. Many state laws prohibit non-compete agreements in which an employee agrees to not work for a competitor for some period of time after they leave your employment. I find the B2B agreements come up less frequently, so this case piqued my interest.
In this case (thank you, U.S. Chamber for posting it), a retailer prohibited five of its high-end suppliers from hiring any of its “luxury retail employees” for at least six months after any of the employees left the retailer’s employment, unless both parties agreed to such hire in advance. The retail employees sued, alleging that agreement restricted their employability in violation of federal law. The 2nd U.S. Circuit Court of Appeals (covering NY, VT & CT) disagreed.
In short, the court distinguished vertical agreements like that described above between suppliers and distributors to horizontal agreement between competitors/employers. “Restraints that are per se unlawful include horizontal agreements among competitors to fix prices or to divide markets…By contrast, vertical restraints, often ‘imposed by a manufacturer or supplier upon its distributor retailer-customers . . . can significantly benefit competition and are permissible unless they violate the rule of reason.”
But wait, there’s more! Before you jump and reinstate your no-hire agreements with your contractors, vendors, suppliers, etc., consider this. In December 2024, the Federal Trade Commission ordered a building services contractor to stop enforcing a no-hire agreement that prohibited building owners and managers from hiring the contractor’s employees. Until the FTC publishes different guidance under the current Administration that suggests a different result, consult with your company’s legal counsel.
