JANUARY 2013

Legal Focus

business-building efforts, such as hiring or research and development, decreases. Ultimately, employees are impacted negatively through these agencies’ actions, which may be well-meaning, but are often misguided.

What are your opinions on the case involving eBay which is mentioned above?

The Department of Justice’s complaint against eBay alleges that eBay violated antitrust laws by (a) agreeing with Intuit not recruit each other’s employees, and (b) agreeing not to hire Intuit employees. The DOJ alleges that this agreement is anticompetitive on its face and thus a per se violation of antitrust laws. This stance illustrates that the DOJ is likely to continue to view restraints on employers’ ability to recruit and hire as per se violations.

This is not the first such case, but obviously, these are two high-profile competitors, a fact which produces a great amount of interest in the outcome. Most similar cases claiming that such agreements violate anti-trust laws have been unsuccessful because the agreements do not deny employees access to the broader market. While the employees may be denied access to certain competitors, they still have access to the remaining competitors in the industry. eBay’s defense will likely follow this path.

Have you been involved in any similar cases?

Yes. We have been involved with a case wherein several employment agreements were attacked on antitrust grounds. One key difference in the case I dealt with, however, was that the employment agreements at issue were between employee and employer, as opposed to the eBay case wherein two employers made the agreement.

In the case that we litigated, several employees were pursued by a former employer for allegedly violating the provisions of the non-compete agreements. In the ensuing litigation, the employees argued that the non-compete agreements were, among other things, unlawful under anti-trust laws because they had the effect of restricting competition in the market. Ultimately, the court was not required to address the antitrust aspects of the case. Still, the case highlighted the importance of considering all aspects of the law, including antitrust law, when drafting, or giving advice relating to, any agreement that restricts an employee’s right to change employers.

In your jurisdiction, what agreements between employers restrict the competition of workers and also restrict worker pay?

No-hire/no-solicitation agreements, similar to those found in the eBay case mentioned above, are fairly common. However, agreements between employers that attempt to restrict worker pay are

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uncommon. What we see most often are employment agreements that prohibit employees from recruiting their former co-workers. These types of anti-poaching/non-solicitation agreements do not trigger the same anti-trust concerns that may arise when two employers agree on a course of action that ultimately affects their respective employees.

What are the main challenges involved in hiring within competitive industries?

Although replacing talented employees is a concern, a primary reason employers attempt to limit the poaching of employees is that these employees often have valuable client and customer relationships as well as knowledge of confidential information and trade secrets. A significant, and fairly recent, challenge is the prevalence of new technology and social media as a means by which to transmit sensitive business information to others, including trade secrets and customer-related information. Employers constantly face the challenge of adapting to and addressing these ever-changing technologies in an effort to protect their confidential information and customer relationships.

Have you noticed a rise in employment-related cases as the world recovers from the financial downturn?

While the total amount of employment-related claims has remained fairly steady, we have noticed that employers are more willing to fight non- meritorious employment-related claims, rather than simply settling early on in an attempt to avoid the expenses inherent with litigation. LM

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contact details:

Michael Grubbs, Esq. Sherman & Howard L.L.c.

201 East Washington Street, Suite 800 Phoenix, arizona 85004

tel: 602-240-3000 Fax: 602-240-6600

Email: mgrubbs@shermanhoward.com