Businesses are constantly challenged by the ever-evolving landscape of labor and employment law, with new legislation and judicial developments occurring almost daily fueling a seemingly never-ending stream of litigation. For companies operating in multiple states, complying with this patchwork of federal, state, and local laws and developments can be daunting. Knowing these issues are a top concern for management and in-house counsel, Morrison Foerster keeps pace with this rapidly evolving landscape. MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues covering key judicial, litigation and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Co-Chair, Global Employment and Labor Practice

Partner

Andrew Turnbull represents companies on a broad range of labor and employment litigation and counseling matters. He has successfully defended clients in complex employment litigation before federal and state courts and administrative agencies. A primary focus of his practice involves helping companies navigate the unique employment issues that arise when doing business with the federal government, including advising on all aspects of OFCCP compliance, creating and implementing affirmative action plans, defending OFCCP audits and onsite investigations, conducting mock pay equity audits, drafting and developing business ethics policies and programs, and complying with the Service Contract Act, E-Verify, and the Drug Free Workplace Act.

Andrew Turnbull

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MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues, covering key judicial, litigation, and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits. To learn more about our capabilities, please visit the <a href="https://www.mofo.com/capabilities/employment-labor" target="_blank">Employment + Labor</a> practice page and read about our <a href="https://www.mofo.com/people?practices=Employment%20%2B%20Labor" target="_blank">Team</a>.

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Fourth Circuit Stays Injunction of Trump DEI Executive Orders

President Trump Rescinds Affirmative Action for Federal Contractors and Requires Enforcement Plan to End Unlawful DEI at Private Companies

FAR Council Withdraws “Pay Equity and Transparency” Proposed Rule

The “Preventative Duty”: New Law Places Active Duty on Employers in the UK to Prevent Sexual Harassment in the Workplace

Good News for Employers: Texas Court Blocks FTC’s Non-Compete Ban

New York State is expected to join the <a href="https://elc.mofo.com/topics/minnesota-passes-near-total-ban-of-non-compete-agreements" target="_blank">growing number of states</a> that significantly limit or prohibit non-compete agreements. On June 20, 2023, the New York State legislature passed S3100A, a bill broadly prohibiting post-employment non-compete restrictions. S3100A is expected to be signed by Governor Kathy Hochul and would take effect 30 days after her signature. Read the <a href="https://www.mofo.com/resources/insights/230622-new-york-state-non-compete-ban-bandwagon" target="_blank">full client alert</a>.

Michael Schulman is a partner in the firm’s Global Employment and Labor Group and co-head of the firm’s Washington, D.C. Litigation Department.

Michael Schulman

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New York State is expected to join the growing number of states that significantly limit or prohibit non-compete agreements.

New York State Slated to Join Post-Employment Non-Compete Ban Bandwagon

The last few months have seen some important and significant developments in UK employment law. Amongst other things, we have seen new guidance published on <a href="https://www.mofo.com/resources/insights/230620-key-updates-for-uk-employers#_ftn1" target="_blank">ethnicity pay gap reporting</a>, <a href="https://www.mofo.com/resources/insights/230620-key-updates-for-uk-employers#_ftn2" target="_blank">positive action</a>, and <a href="https://www.mofo.com/resources/insights/230620-key-updates-for-uk-employers#_ftn3" target="_blank">employee rights to access personal information</a>. <a href="https://www.mofo.com/resources/insights/230620-key-updates-for-uk-employers#_ftn4" target="_blank">Additional protections for parents and carers</a> have been confirmed and the UK Government has announced <a href="https://www.mofo.com/resources/insights/230620-key-updates-for-uk-employers#_ftn5" target="_blank">proposals</a> to reform rules on working time, holiday pay, and non-compete clauses. Set out in this alert is a brief round-up of the key developments from the last couple of months that will be of particular interest to international employers of UK-based employees.Read the <a href="https://www.mofo.com/resources/insights/230620-key-updates-for-uk-employers" target="_blank">full client alert</a>.

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Managing Partner, London

Annabel is a partner at Morrison Foerster and co-Managing Partner of the London office.

Annabel Gillham

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Of Counsel

Oliver Spratt is Of Counsel based in the London office of Morrison Foerster. 

Oliver Spratt

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Associate

Lara Sirimanne is an associate in the London employment practice of Morrison & Foerster. She advises domestic and international clients on the full spectrum of both contentious and non-contentious emp

Lara M. King

Lara King

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What You Need to Know About Restructuring and the Energy Crisis

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The last few months have seen some important and significant developments in UK employment law. Amongst other things, we have seen new guidance published on ethnicity pay gap reporting, positive action, and employee rights to access personal information.

Key Updates for UK Employers: What Needs to be on Your Radar for the Second Half of 2023

On May 30, 2023, the National Labor Relations Board’s (the “NLRB’s”) General Counsel Jennifer Abruzzo (the “General Counsel”) issued <a href="https://www.nlrb.gov/news-outreach/news-story/nlrb-general-counsel-issues-memo-on-non-competes-violating-the-national" target="_blank">Memo General Counsel 23-08</a> (the “Memo”), expansively finding that non‑competes with employees violate the National Labor Relations Act (the “Act”), except in limited circumstances. As <a href="https://elc.mofo.com/topics/nlrb-gc-takes-broad-view-of-the-mclaren-macomb-decision" target="_blank">foreshadowed in her memo</a> on the NLRB’s enforcement against overbroad non‑disparagement and confidentiality clauses related to the McLaren Macomb decision, the General Counsel claims, without clear legal authority or other support, that offering, maintaining, or enforcing non‑competes and non-solicits with employees violates Section 7 of the Act where they reasonably tend to chill employees from engaging in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Memo lists a variety of rationales, including non-competes with low-wage workers, to justify the General Counsel’s finding. The Memo, however, fails to articulate any clear examples of how non-competes interfere with traditional “concerted activities” protected by the Act, particularly in any manner to justify the sweeping scope of non-competes the Memo appears to find are unlawful. The Memo simply declares that non-competes are unlawful under the Act unless the employer can show that the non‑compete is “narrowly tailored to special circumstances justifying the infringement of employee rights.” Read the <a href="https://www.mofo.com/resources/insights/230605-nlrb-general-counsel-memo-seeks-aggressive-enforcement?utm_source=publication&utm_medium=email" target="_blank">full client alert</a>.

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Eric Akira Tate co-chairs the firm’s Global Employment and Labor Group. He represents technology and other companies in bet-the-company trade secrets and employee mobility cases.

Eric Akira Tate

Eric Tate chairs the firm’s Global Employment and Labor Group. He has represented technology and other companies in the biggest and most highly-publicized trade secrets and employee mobility cases across multiple industries. Eric also represents companies in whistleblower, wage and hour, and other employment litigation.

Eric Tate

Andrew co-chairs the firm’s Global Employment and Labor Group. He represents companies on a broad range of labor and employment litigation and counseling matters, successfully defending clients in number complex matters before federal and state courts and administrative agencies.

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Melissa Harclerode is an associate in Morrison Foerster’s Employment + Labor Group in the Washington, D.C. office.

Melissa M. Harclerode

Melissa Harclerode

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On May 30, 2023, the National Labor Relations Board’s (the “NLRB’s”) General Counsel Jennifer Abruzzo (the “General Counsel”) issued Memo General Counsel 23-08 (the “Memo”), expansively finding that non‑competes with employees violate the National Labor Relations Act (the “Act”), except in limited circumstances.

NLRB General Counsel Memo Seeks Aggressive Enforcement Against Employee Non-Competes

The German Whistleblowing Act (the “Act”) requires all legal entities in the private sector with at least 50 “workers” to set up internal reporting channels for whistleblowers. Since the Act does not specify that this number refers to full-time equivalents (FTE), it is likely that this threshold refers to the total headcount of employees, so companies should also take part-time employees fully into account when evaluating if they fall under the scope of the Act. Note that the term “workers” not only includes regular employees, but also executive employees, fixed-term employees, interns, and trainees.Read the <a href="https://www.mofo.com/resources/insights/230602-the-new-german-whistleblowing-act" target="_self">client alert</a>.

What You Need to Know About the New German Whistleblowing Act

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For more than two decades, Hanno has advised and represented leading domestic and international corporations in a wide variety of industries, including technology, consumer products, automotive, and 

Hanno Timner

Hanno Timner is a partner in the Berlin office and head of the Employment and Labor practice group in Germany. He advises and represents national and international employers in all labor law issues and disputes.

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Senior Associate

Christin is a senior associate at Morrison & Foerster’s German office in Berlin and is a member of the Employment & Labor practice group. She advises national and international companies on all issues

Christin Dunkel

Christin is a senior associate at Morrison & Foerster’s German office in Berlin and is a member of the Employment & Labor practice group. She advises national and international companies on all issues and disputes arising under labor law.

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Jasmin advises national and international companies on all data protection issues as well as all disputes and questions arising under labor law.
Jasmin studied law at the Humboldt-Universität zu Berli

Jasmin Dajana Kuehner

Jasmin Kuehner

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What You Need to Know About the New German Whistleblowing Act

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The German Whistleblowing Act (the “Act”) requires all legal entities in the private sector with at least 50 “workers” to set up internal reporting channels for whistleblowers.

On May 16, 2023, the Minnesota legislature passed <a href="https://www.revisor.mn.gov/bills/text.php?number=SF3035&version=latest&session=ls93&session_year=2023&session_number=0" target="_blank">SF 3035</a> (the “Bill”), banning nearly all post-termination non-compete agreements with employees and independent contractors. Although the Bill marks another state in the trend of jurisdictions passing laws limiting the use of employee non-competes, the Bill goes even further than most of the recent laws to join the ranks of California, Oklahoma, and North Dakota to ban practically all employee non-compete agreements. Some of the more notable provisions include:<ul><li>Banning non-compete agreements with all levels of employees and independent contractors, regardless of compensation or role, with only limited exceptions for non-competes entered into in connection with the sale of business or dissolution of a business;</li></ul><ul><li>Requiring employers to use Minnesota law and forum;</li></ul><ul><li>Allowing courts to award attorneys’ fees to plaintiffs who prove violations of the Bill; and</li></ul><ul><li>Excluding nondisclosure and non-solicitation agreements from the Bill’s requirements.</li></ul>Minnesota Governor Tim Waltz is expected to sign the Bill. Once signed, the Bill will apply to all non-compete agreements entered into on or after July 1, 2023, but it would not apply retroactively to non-competes entered into before then. Employers with employees and independent contractors in Minnesota should start preparing for compliance with the Bill, including reviewing their template employment agreements with non-competes and considering updating their existing policies and practices for preventing unfair competition. Not RetroactiveThe Bill expressly states that the limitations on non-competes are not retroactive. So, the Bill will not apply to non-compete agreements entered into prior to July 1, 2023, and those agreements will continue to be interpreted consistent with existing Minnesota precedent.Covered Employers and IndividualsThe Bill will cover nearly all non-competes between employers and their employees and independent contractors. The Bill broadly defines “employer” to include “any individual, partnership, association, corporation, business, [or] trust” and includes any person “acting directly or indirectly in the interest[s] of an employer in relation to an employee.”“Employee” is also defined broadly to include “any individual who performs services for an employer, including independent contractors.” The Bill defines independent contractors as anyone whose engagement “is governed by a contract” and is not reported to the IRS on a W-2, including any corporate entity if the employer requires an individual to form such entity “for purposes of entering into a contract for services as a condition of receiving compensation under an independent contractor agreement.”Unlike some of the other recent state non-compete laws that limit non-competes to employees under a certain compensation threshold, such as non-compete laws in <a href="https://elc.mofo.com/topics/tightening-restrictions-on-noncompetes" target="_blank">Washington</a> and the <a href="https://elc.mofo.com/topics/dc-council-waters-down-non-compete-ban-while-keeping-some-significant-limitations" target="_blank">District of Columbia</a>, the Bill does not distinguish between types of employees in its ban on non-competes. Rather, the Bill joins jurisdictions like California, banning non-competes with employees at all levels regardless of compensation, including highly paid C‑Suite executives. It also expressly covers non-competes with independent contractors, which have been absent from some of the non-compete legislation other jurisdictions have recently issued.Covered AgreementsThe Bill prohibits nearly all post-termination non-competes with employees and independent contractors. The Bill defines a “covenant not to compete” as an “agreement between an employee and employer that restricts the employee, after termination of the employment, from performing: (1) work for another employer for a specified period of time; (2) work in a specified geographical area; or (3) work for another employer in a capacity that is similar to the employee’s work for the employer that is party to the agreement.” Non-Covered AgreementsThe Bill contains the following two limited exceptions where non-competes are permitted:<ul><li>Non-competes entered into in connection with the sale of a business, where the agreement prohibits the seller from carrying on a similar business within a reasonable geographic area and for a reasonable length of time; and</li></ul><ul><li>Non-competes in anticipation of the dissolution of a business, where the applicable parties agree that all or any number of the parties will not carry on a similar business within a reasonable geographic area where the business has been transacted.</li></ul>The Bill also explicitly does not apply to the following types of restrictive covenants:<ul><li>Nondisclosure agreements or agreements designed to protect trade secrets or confidential information; and</li></ul><ul><li>Non-solicitation agreements or agreements restricting the ability to use client or contact lists or solicit customers of the employer.</li></ul>The Bill also only applies to non-compete restrictions that cover periods “after termination of employment.”  So, employers can still have non-competes with employees or independent contractors during their employment or engagement.Mandatory Minnesota Law and Venue RequiredThe Bill prohibits employers from trying to avoid these requirements by using another state’s law or forum.  Specifically, the Bill requires employers to use Minnesota law and forum for any agreements entered into as “a condition of employment” with employees who primarily reside and work in Minnesota. It will be an open question whether employers can use other states’ laws or forums that are not entered into as a condition of employment (e.g., for equity awards or bonus agreements). If employers try to use another choice of law or forum in covered agreements, the choice of law and forum will be voidable and the matter would be adjudicated in a Minnesota court under Minnesota law.Remedies for ViolationsThe inclusion of an unenforceable non-compete would not automatically render the entire agreement with the offending provision unenforceable. Rather, the Bill states that it would not be “construed to render void or unenforceable any other provisions in a contract or agreement containing a void or unenforceable covenant.” The Bill also allows courts discretion to award an employee reasonable attorneys’ fees for trying to enforce his or her rights under the Bill. So, it will be important for employers to ensure they comply with the Bill since they could find themselves having to pay attorneys’ fees for agreements found to violate the Bill.Practical Steps for EmployersBusinesses with operations, employees, or independent contractors in Minnesota should review their non-compete practices and policies in light of the Bill. As an initial step, employers should review and, if needed, revise template employment agreements with non-competes to comply with the Bill, including by removing post-employment non-competes and updating choice of law and forum selection provisions for covered employees and independent contractors.Because the Bill will ban post-employment non-competes with all levels of employees and independent contractors (regardless of role and compensation), employers should determine what agreements or policies they can adopt to protect themselves from unfair competition either before the Bill takes effect or without the use of non-competes. Some possible actions to consider include:<ul><li>Trying to get non-compete agreements in place with covered employees and independent contractors before the Bill takes effect.</li></ul><ul><li>Updating confidential information policies and agreements, including reevaluating how employees are provided with access to the employer’s highly sensitive and confidential information. Because employers will lose their ability to have one of the most effective tools for preventing against unfair competition, employers should consider whether limiting the distribution of sensitive information to reduce possible exposure is advisable. Employers might also consider implementing systems that limit, control, and track access to company confidential information and trade secrets to mitigate the risk of misuse when covered employees and independent contractors go to work for competitors.   </li></ul><ul><li>Consider whether to revise customer and employee non-solicitation agreements and confidentiality provisions to ensure they provide meaningful protection of the employer’s trade secrets, intellectual property, goodwill, and customer and employee relationships.</li></ul>The Bill also marks the latest state in a trend of jurisdictions across the United States cracking down on non-compete provisions. As we <a href="https://elc.mofo.com/topics/recent-non-compete-trends-courts-continue-to-enforce-non-competes-while-politicians-seek-to-narrow-them" target="_blank">previously reported</a>, we have seen a trend of legislatures and regulators seeking to ban or narrow the scope of non-compete agreements, and some courts are even signaling closer scrutiny of non-competes under existing precedent. The following are some of the more notable trends and developments:<ul><li>Several states, including <a href="https://www.mofo.com/resources/insights/220517-colorados-new-limits-on-employee-non-competes" target="_blank">Colorado</a> and <a href="https://elc.mofo.com/topics/illinois-new-restrictions-non-competes-and-non-solicits" target="_blank">Illinois</a>, have issued more comprehensive non-compete legislation, significantly limiting the use of non-competes with employees, and even more states have banned non-competes for low wage workers.</li></ul><ul><li>The Federal Trade Commission (FTC) <a href="https://www.mofo.com/resources/insights/230106-ftc-proposes-sweeping-ban-employee-non-competes" target="_blank">recently proposed a rule</a> seeking to ban non-compete agreements with employees, even non-competes entered into before the rule becomes final, except in very limited circumstances. Whether the FTC will narrow the rule before it becomes final remains to be seen, but the FTC’s rule will almost certainly be subject to legal challenges once it becomes final. Regardless of the outcome of the FTC’s proposed rule, the FTC has pursued <a href="https://www.mofo.com/resources/insights/230117-ftc-takes-unprecedented-enforcement-actions" target="_blank">enforcement actions</a> and entered into consent decrees with several companies requiring them to rescind non-compete agreements with their employees.</li></ul><ul><li>Some state courts have also appeared to subject non-compete agreements to closer scrutiny, including <a href="https://elc.mofo.com/topics/trio-of-delaware-cases-signal-stricter-review-of-sale-of-business-non-competes" target="_blank">Delaware Chancery Courts</a> that have recently refused to enforce or blue pencil sale-of-business non-competes.</li></ul>In light of these and other developments, businesses should continue to monitor changes in this area that may impact their non-compete strategies and practices with employees and independent contractors.

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New Guidance on COVID-19 Protocols for Contractor Employees at Federal Facilities

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On May 16, 2023, the Minnesota legislature passed SF 3035 (the “Bill”), banning nearly all post-termination non-compete agreements with employees and independent contractors. Although the Bill marks another state in the trend of jurisdictions passing laws limiting the use of employee non-competes, the Bill goes even further than most of the recent laws to join the ranks of California, Oklahoma, and North Dakota to ban practically all employee non-compete agreements.

Minnesota Passes Near Total Ban of Non-Compete Agreements

The U.S. Department of Justice’s (“DOJ’s”) ongoing efforts against no-poach agreements suffered their latest setback on April 28, 2023, following the Connecticut federal court’s ruling in U.S.A. v. Mahesh Patel, acquitting all six defendants of criminal liability for allegedly entering into a horizontal no-hire agreement. Though it is tied to the particular facts of the case, the ruling is yet another sign that the DOJ continues to face an uphill battle to impose criminal liability on what typically has been a civil issue.Overview of DOJ No-Poach EnforcementThe DOJ has the power to enforce restraints of trade that violate the Sherman Act. Criminal liability under the Sherman Act can be considerable—companies face criminal fines of $100 million or more, and executives face up to 10 years in prison.Criminally, the DOJ typically has gone after only per se restraints of trade. The per se rule historically has been applied to restraints such as price-fixing, bid-rigging, and market allocations “that would always or almost always tend to restrict competition and decrease output.”<a href="#_ftn1" target="_self" id="_ftnref1">[1]</a> These restraints are considered per se unreasonable and therefore “do not require elaborate inquiry as to the precise harm they have caused or the business excuse for their use.”<a href="#_ftn2" target="_self" id="_ftnref2">[2]</a> No-poach agreements, however, had not traditionally been a DOJ target for criminal enforcement.<a href="#_ftn3" target="_self" id="_ftnref3">[3]</a>That began to change around 2010, when the DOJ started filing multiple civil enforcement actions against Silicon Valley tech companies, arguing no-poach agreements between them were per se unlawful (the “High Tech cases”). After a couple of years, the parties settled and entered stipulated final judgments that prohibited agreements to refrain from soliciting, recruiting, or otherwise competing for employees. But these judgments did not prohibit an agreement with a “no direct solicitation provision” if it was not a “naked” agreement, i.e., if the agreement was ancillary to a specific legitimate transaction such as existing or future employment or severance agreements, M&A deals, contracts with consultants, settlement agreements, and contracts with resellers.<a href="#_ftn4" target="_self" id="_ftnref4">[4]</a>The DOJ brought its first criminal actions against no-poach agreements in 2021. Other than one plea deal and one case that remains pending, defendants have obtained acquittals against the DOJ in each case to date. Patel was the latest.<table><colgroup data-width='624'><col style="width:35.256410256410255%"><col style="width:30.448717948717945%"><col style="width:34.294871794871796%"></colgroup><tbody><tr><td>Case</td><td>Charges</td><td>Outcome</td></tr><tr><td>U.S. v. DaVita, No. 1:21-cr-00229 (D. Colo. Jul. 14, 2021)</td><td>Three competitors—each run by DaVita alumni—agreed to (1) avoid recruiting DaVita’s executives and (2) tell DaVita employees applying to work for any of the three competitors that they had to alert DaVita they were considering leaving before they could receive an offer</td><td>Acquittal: Not guilty jury verdict</td></tr><tr><td>United States v. Manahe, No.  2:22-cr-00013-JAW (D. Me. Mar. 22, 2023)</td><td>Two-month conspiracy between April and May 2020 not to hire each other’s caretakers and to fix caretaker wages</td><td>Acquittal: Not guilty jury verdict</td></tr><tr><td>U.S.A. v. Mahesh Patel, No. 3:21-CR-220 (VAB), (D. Conn. Apr. 28, 2023)</td><td>Conspiracy in which they agreed not to poach competitors’ workers for more than a decade</td><td>Acquittal: Court granted judgment of acquittal before case went to jury</td></tr><tr><td>U.S. v. Hee, No. 2:21-cr-00098 (D. Nev. Oct. 27, 2022)</td><td>No-hire agreement and agreement not to raise wages for school nurses in Clark County, Nevada</td><td>Plea agreement: Staffing company defendant, VDA OC LLC, agreed to pay $134,000 in criminal fines and restitution as a result of the plea. Individual defendant Mr. Hee agreed to 180 hours of community service and pretrial diversion</td></tr><tr><td>United States v. Surgical Care Affiliates LLC, No. 3:21-cr-00011 (N.D. Tex. Nov. 11, 2022)</td><td>Agreements with DaVita and another company not to solicit each other’s executives</td><td>Pending: Trial originally scheduled for January 2023 has been continued. Defendant’s motion to dismiss is pendingDefendant just filed a Notice of Additional Authority on May 9, 2023, arguing that the Patel decision strongly supports its motion to dismiss</td></tr><tr><td>United States v. Jindal, No. 20-cv-0358 (E.D. Tex. Apr. 14, 2022)</td><td>Conspiracy to fix wages of physical therapist assistants in Dallas area</td><td>Acquittal: Not guilty jury verdict</td></tr></tbody></table>U.S.A. v. Mahesh PatelBackground. Patel was one of the DOJ’s higher-profile cases. In December 2021, the DOJ indicted six executives and managers from Raytheon and other aerospace firms, charging them with a conspiracy in which they agreed not to poach competitors’ workers for more than a decade. The court denied defendants’ motion to dismiss, and the case went to trial. Once the government rested its case-in-chief, defendants moved for a judgment of acquittal, arguing that the government’s evidence “does not permit a reasonable juror to find that Defendants entered into the charged market allocation agreement.” The court agreed.Holding. “[N]ot all no poach agreements are market allocations subject to per se treatment,” the court held, “and therefore, determining whether a no poach agreement is a market allocation is highly fact specific.” Based on the facts in Patel, the court found that, as a matter of law, the agreement at issue did not involve a market allocation under the per se rule because the “alleged agreement itself had so many exceptions that it could not be said to meaningfully allocate the labor market of engineers” between the firms.<a href="#_ftn5" target="_self" id="_ftnref5">[5]</a>The alleged agreement allowed, for instance, hiring between two of the defendants on a case‑by‑case basis with the other side’s consent. The restrictions on hiring also apparently shifted “throughout the course of the conspiracy.” Evidence showed that, at some point, certain restrictions were for just three to six months, whereas at other times defendants were told they could hire other defendants’ employees “when [it] really needed them.”While the court acknowledged that there were emails “suggesting a blanket agreement not to hire,” that apparently was not borne out in practice. “Hiring among the relevant companies was commonplace,” the court found, “throughout the alleged agreement.” The court identified only one purported year-long hiring freeze. And even then, there were still some limited exceptions. The court therefore held that, while the agreement may have constrained mobility to some degree, it did not “allocate the market” “to any meaningful extent.” In reaching this holding, the court denied it was imposing any new requirements for per se liability and suggested that, if anyone may be trying to make new law, it was the government:If anything, the government has tried to expand the common and accepted definition of market allocation in a way not clearly used before.<a href="#_ftn6" target="_self" id="_ftnref6">[6]</a>Practical TakeawaysDespite defendants’ clear victory, the court’s ruling does not mean that naked no-poach agreements are now exempt from criminal liability or the per se rule. The per se analysis is highly fact-specific, as was the court’s ruling. While it imposed some restraints on employee mobility, the agreement in Patel did not result in a blanket hiring freeze. The court instead found that hiring among the companies was “commonplace.”Even after Patel, this continues to be a largely unsettled area of the law. The ruling may make it harder for the DOJ to prevail in criminal prosecutions against no-poach agreements. But regardless, employers should continue to keep in mind that, even if criminal liability or prosecution is avoided, there can still be a risk of civil liability depending on the nature of the agreement. See, e.g., High-Tech cases. Courts and juries may be less reluctant, for instance, to find companies civilly as opposed to criminally liable. As the Patel court noted, courts “are obligated to construe criminal statutes narrowly so that Congress will not unintentionally turn ordinary citizens into criminals.”While Patel is yet another blow to the DOJ’s efforts, it is not clear whether the DOJ will continue to bring criminal cases against no-poach agreements or back off in light of its latest defeat.Whatever happens, employers should continue to consult with counsel before entering into agreements with restrictive covenants such as no-hires.<a href="#_ftnref1" target="_self" id="_ftn1">[1]</a> United States of America v. Mahesh Patel, et al., No. 3:21-CR-220 (VAB), 2023 WL 3143911, at *3 (D. Conn. Apr. 28, 2023).<a href="#_ftnref2" target="_self" id="_ftn2">[2]</a> Id.<a href="#_ftnref3" target="_self" id="_ftn3">[3]</a> A MoForward Warning Comes True: No Poach Enforcement Hits the Defense Industry.<a href="#_ftnref4" target="_self" id="_ftn4">[4]</a> <a href="https://www.justice.gov/atr/case-document/final-judgment-0" target="_self">U.S. v. Adobe Systems, Inc., et al.</a><a href="#_ftnref5" target="_self" id="_ftn5">[5]</a>United States of America v. Mahes Patel, et al., No. 3:21-CR-220 (VAB), 2023 WL 3143911, at *9 (D. Conn. Apr. 28, 2023).<a href="#_ftnref6" target="_self" id="_ftn6">[6]</a> Id. at n.7.

No-Poach Case Alert: DOJ’s No-Poach Strategy Dealt Another Blow As Court Tosses Case Before It Reaches Jury

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Cooper Spinelli is a member of the Litigation Department and part of the firm’s Employment & Labor Group. His practice focuses on trade secrets and restrictive covenants, employee mobility and executive disputes, whistleblower claims, and general business litigation.

Cooper J. Spinelli

Cooper Spinelli