Recently, in United States v. Adobe Systems, Inc. et al. (Adobe Systems) the antitrust division of the US Department of Justice (DOJ) filed a lawsuit against some of the largest technology companies in North America, namely, Adobe, Apple, Intel, Google, Intuit and Pixar, in respect of their agreement not to solicit or "cold call" each other's employees. "Cold calling" refers to any solicitation for employment, whether by phone, email, letter or otherwise, targeted at an employee who has not previously applied for the position in question. Employees of the defendant companies were not made aware of the no cold-call agreements.
According to the DOJ, the agreements were anti-competitive as they reduced the ability of the companies to compete for workers and limited their employee's exposure to superior job opportunities, better compensation and improved benefits. It was also alleged that because these agreements were managed by many of the companies' most senior executives, they had the effect of disrupting the ordinary salary-setting mechanisms present in the labour market for high-tech employees. As the alleged "no cold call" agreements related to all employees in all offices irrespective of geographical location, time period, job function or product group, and were not limited to any specific collaboration agreement between the defendant companies, they were said to be unjustified and broader than reasonably necessary for any legitimate collaboration between the companies (i.e. joint venture).
Along with the lawsuit, the DOJ filed a proposed Final Judgment (to which the defendants consented), which prohibits the companies from enforcing their agreements or entering into any further employee non-solicitation agreements for a five year period of time, and requires them to conduct employee compliance training seminars. Additionally, the defendants are required to allow the DOJ to inspect company records for compliance with the terms of the Final Judgment. While the proposed settlement does not require the companies to pay any penalties, it does not protect them from civil actions brought by employees who are able to demonstrate that they suffered injury as a result of the defendants' actions.
The Adobe Systems lawsuit is noteworthy in that it relates to the labour market for highly skilled employees rather than to a market for typical products or services. It is also remarkable that, in a large market for technical services, comprised of many significant competitors and prospective employees, the DOJ nonetheless maintained that because of the tech sector's high demand for skilled employees and the unreasonably general nature of the "no cold call" agreements, the agreements constituted naked restraints1 of trade that ought to be considered per se illegal.
It is important to note that Adobe Systems does not mean that all employee non-solicitation agreements will raise competition law concerns. The Final Judgment specifically recognizes that non-solicitation agreements that are "ancillary to legitimate pro-competitive collaborations", such as agreements in connection with legal mergers or joint-ventures, may be permissible. Nevertheless, companies would be well advised to consider and review their practices relating to non-solicitation agreements ensuring that any such restrictions are reasonably necessary and ancillary to a broader and lawful pro-competitive agreement. Although Adobe Systems is a US proceeding, similar laws do apply in Canada and it is not unreasonable to assume that analogous proceedings could be advanced in Canada.
Employers working in industries with highly competitive, high expertise labour markets such as research and development, technology, as well as banking and investments, ought to pay significant attention to these issues.
Footnote
1 In Canada, agreements which constitute naked restraints on competition have typically been limited to agreements to (i) fix prices, (ii) allocate markets, or (iii) restrict/limit/fix supply.
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