Speaker 13: Our next panel is sponsored by the antitrust class actions committee, which is headed up Rose Morales and Cathy Porez and the corporate council in section. It will cover no poach agreements and the evolution of anti-trust enforcement in labor markets.
Martin: Hi, good morning. Let me introduce our panelists, we have Eric [inaudible 02:47:14] Kirkland Distinguished Service professor the University of Chicago Law School. He’s currently finishing up a stint as the counsel of anti-trust division of the Justice Department. To my left is Andre Geverola, he’s a partner in the anti-trust group at Arnold Quarter. And leads the [inaudible 02:47:31] investigation practice. He was the first director of criminal litigation in the anti-trust division of the US Department of Justice, where he supervised anti-trust matters across the country. Earlier in his career in the anti-trust division, Mr. Geverola worked as a trial attorney and managed six [inaudible 02:47:51] class divisions without a loss.
And in the middle we have Dan Walker, a shareholder at Berger Montague where he represents finance, the anti-trust class actions across a broad range of industries. Earlier in his career he was an attorney at the federal trade commission [inaudible 02:48:04].
So welcome to our panel on recent developments and anticipated trends on no poach litigation. For a little less than an hour we’re going to cover a brief overview of what no poach agreements are, and the evolution of antitrust enforcement in labor markets. We’re going to discuss crime government enforcement actions and private litigation, and have a discussion regarding legal and policy issues implicated by no poach agreements. We’re hoping to wrap up in time for some questions.
So without further ado, let me get started with you Eric. Can we discuss the basics of this area before diving in to the legal and policy implications? Can you give us an overview about what no poach agreements are, and when we talk about no poach agreements, do we need to distinguish between no poach agreement that are part of larger business agreements, that are ancillary to a larger agreement, and those that are not? And what about agreements that exist between companies that are competitors, versus agreements between supplier [inaudible 02:49:05].
Speaker 12: Sure, thank you Margaret for having me on this panel. A no poach agreement is an agreement among employers not to hire away each other’s employees. It’s just a restraint of trading very similar restraint of trading that one sees among other types of markets, for example [inaudible 02:49:30] you have an agreement not to poach each other’s customers. The kinds of no poach agreement that we’d see stereotypically between competing employers, so there are horizontal non-competition agreements that are subject to per se, but of course there’s a no poach agreement [inaudible 02:49:35] and so could be ancillary to a larger agreement such as a joint venture for [inaudible 02:49:35] and typically the ancillary agreement would be something [inaudible 02:49:35]. And the doctrinal analysis is just the same as you would see for agreements in product markets.
And no poach agreements have gotten a lot of attention recently because of concerns about anti-competitive behaviors in labor markets, which I think began, this goes back quite a long time but the hi-tech no poach agreement from 2010 involving Silicon Valley companies, recruiting from Google which gained a great deal of attention an ultimately the twists and turns led to a lot of litigations [inaudible 02:51:04].
Speaker 13: Thank you. I should also say the opinions expressed by the panelists reflect their own views, not necessarily the opinions of their organizations.
Speaker 12: I should say that also.
Speaker 13: I covered it for everybody. From an economic perspective, what are some of the social and economic effects of no-poach agreements?
Speaker 12: So no poach agreement in the labor market, like anti-competitive horizontal agreement in product markets, obviously meet [inaudible 02:51:37] not division. Which is generally considered a bad thing in anti-trust policy. So you have these two employers who are supposed to compete for workers which will normally lead to higher wages for the workers, in this context that’s considered good, I know there’s a general view that we want to keep the costs down, in the competitive market employers bid up the wages, and that lead to marginal revenue profit and that ought to lead to the people entering the marketing, marketing that this will see more outcome. So in the normal operation of labor markets that can also lead to [inaudible 02:52:17] that’s the way markets should work, and the reason why employers would enter into a no poach agreement, something like sellers might enter into an agreement not to poach each other’s customers or to fix prices, and that is to maximize profits, if they can agree not to poach each other’s customers, that will result in [inaudible 02:52:44] which will raise their profits. But of course that means some workers will be driven out of the market, that means output will go down, that will normally mean that prices will go up.
So then from an economic standpoint there’s a transfer from workers and consumers to the investors, the owners of the businesses.
So that’s the basic outcome that results from no poach agreements. And it’s exactly the same kind of harm that you see in product markets when sellers [inaudible 02:53:21].
Speaker 13: You got to where I was going next, which is do you view labor markets differently from commodity markets? When we think about no poach agreements, do you think we should be thinking about them differently from the way commodity markets work, or in your view is it exactly the same?
Speaker 12: The legal analysis is the same. And the Supreme Court have said this, the lower courts have said this, saying that triangular analysis applies to labor markets and product markets, the same analysis, the same termination of whether to use procedural, or the rule of reason.
And now if you look at this from the perspective of economics, and a high level of generality that economists often use, the same analysis applies, the same supply and demand curves. That obviously is now analyzed the same way that monopolies [inaudible 02:54:23]. But there is a sense in which the two markets are different. Labor markets are in a sense more complicated, there’s more variation in them. Product markets are often simple in that good are often homogenous and interchangeable, if you pick a commodity they’re all the same, so sometimes they’re simpler to analyze, labor markets are almost never like that, people are unique and complicated, and labor markets they’re often unique markets between employers and workers whereas in product markets that does occur quite frequently.
PART 5 OF 12 ENDS [02:55:04]
Speaker 17: … [inaudible 02:55:00] workers, whereas the product markets, that does occur quite frequently, often much more liquid, fluid types of markets. One way to put this, a very general one, is that in labor market, [inaudible 02:55:13] costs are often much higher than the product markets, although the reason for it in product markets [inaudible 02:55:19] actually have very [inaudible 02:55:21]. This just means that in any particular [inaudible 02:55:28] pay attention to the facts [inaudible 02:55:30], but in one of the legal analysis, the same legal tools are used regardless of what type of market we’re talking about. You got to pay attention to the facts and think about [inaudible 02:55:45], but my overall view is that the antitrust problems [inaudible 02:55:51] markets are more secure than the [inaudible 02:55:52] markets because of the problem [inaudible 02:55:55] a certain cause and because of neglect labor market problems by antitrust law relative, but over until quite recently.
Speaker 15: That’s a good segue to talk a little bit more about what that enforcement has been recently. Andre, can you give us some updates on recent government enforcement actions, get into the section about the success of those enforcement actions?
Andre: Sure. I’ll just give a brief history here. As many of you probably know, in 2016, we have issue with the FVC, some guidance, essentially following from the tech cases that happened earlier in the decade. [inaudible 02:56:41] going forward, these will not be civil cases. These will be criminal cases. That came at the tail end of the Obama administration, and I think after that, it took a while before we started seeing cases publicly. At the time, there was some question whether the new administration wasn’t as committed to that initiative, but in reality, it takes a while to build up cases that can be charged.
We saw in 2020 a foray of cases start to appear, the first one being US v. [inaudible 02:57:18] case that involved a physical therapist. Soon after that, there was Surgical Care Affiliates or SCA case, which was a no poach case, and that involved non-solicitation agreements affecting employees of healthcare companies. Then, very soon thereafter, we started seeing more cases, US v. Davita, which basically overlapped with the SCA case and US v. EA, which was [inaudible 02:57:49] thing and no poach case involving school nurses in Las Vegas. Then, after that, US v. Minaya in May, which involved a personal support specialist. There’s an interesting timeline there where a lot of these cases are essentially focused on healthcare workers.
Speaker 16: Gramercy Room.
Andre: I’m not sure if there’s something unique about-
Speaker 16: I’m [inaudible 02:58:18]-
Andre: … the healthcare industry or-
Speaker 16: … new to that.
Andre: … working at a revising [inaudible 02:58:23] industry, I would certainly note that frontline, make sure compliance programs on these issues are updated, making sure labor market enforcement is top of mind for those executives. There’s one more case that’s been filed criminally, US v. Patel, which-
Speaker 16: [inaudible 02:58:48]-
Andre: … is a really interesting case and not just because it’s not a healthcare case. Patel involved no poach allegations about the insurance space engineers. I think what makes it interesting is that, based on the allegations in the indictment, Patel, the lead defendant, was an employee of a company that was a common customer among-
Speaker 16: Going to close my [inaudible 02:59:10]-
Andre: … multiple engineering staffing companies, and the principle allegation and complaint was that he essentially [inaudible 02:59:19] indictments that he orchestrated a no poach among those staffing suppliers basically so that they wouldn’t hire employees away from each other. For those of you who have been practicing [inaudible 02:59:35], kind of sounds like Apple v. [inaudible 02:59:38] case that we’ve seen-
Speaker 16: Okay.
Andre: … but [inaudible 02:59:39] the labor context-
Speaker 16: [inaudible 02:59:42].
Andre: … but there’s another part of that indictment that, I think, also distinguishes [inaudible 02:59:50] allegations that Patel also agree that his company-
Speaker 16: [inaudible 02:59:55]-
Andre: … would hire employees from at least one of these suppliers. This last allegation’s interesting-
Speaker 16: [inaudible 03:00:03].
Andre: … to me because, in terms of applying criminal liability, we’re talking about a customer/supplier relationship. I think we can all probably think about situations, whether it’s staffing agencies or outside consulting firms or auditing firms where a company might supply personnel to a customer-
Speaker 16: [inaudible 03:00:25].
Andre: … and not want that customer just hire away their staff as soon as they-
Speaker 16: [inaudible 03:00:30].
Andre: … would walk through the door. So, this is, I think, a fairly common business arrangement, and to think that, at least under a certain set of facts, that could lead to a per se violation and potential criminal prosecution. I think it’s something to keep an eye out on and important for companies to be aware of.
Speaker 16: And if some of that, you know what, [inaudible 03:00:53]-
Speaker 15: Thank you for that overview. Since 2016, the HR guidelines [inaudible 03:00:59] and DOJ [inaudible 03:01:00] all these cases that you mentioned now-
Speaker 16: [inaudible 03:01:03].
Speaker 15: … with the exception of one guilty plea, we haven’t had a jury conviction. So, the DOJ is working on enforcement [inaudible 03:01:12]. Can you offer some views on limiting [inaudible 03:01:16]-
Speaker 16: [inaudible 03:01:17].
Andre: Sure. Well, I think these are inherently challenging cases. I’ll be clear. I was involved in some of these cases at the early stages before [inaudible 03:01:28], and some of it amounts to-
Speaker 16: Yeah.
Andre: … what’s available on public record.
Speaker 16: [inaudible 03:01:35].
Andre: I think because criminal liability for this conduct is fairly simple-
Speaker 16: [inaudible 03:01:38].
Andre: … it might be tougher to get the same types of evidence that you see in, what I would call, more traditional antitrust cases. A lot of people in this room probably work on those [inaudible 03:01:52] cases [inaudible 03:01:53] the bar, the [inaudible 03:01:55] busy for a while, and I worked on those cases, too, and every other email said, “Please delete after reading-
Speaker 16: I know. [inaudible 03:02:08].
Andre: … whereas in these cases because-
Speaker 16: [inaudible 03:02:08].
Andre: … [inaudible 03:02:08] criminal exposure or something that was underappreciated-
Speaker 16: [inaudible 03:02:10].
Andre: … and it’s more recent, but you may not get that same [inaudible 03:02:12]-
Speaker 16: [inaudible 03:02:13].
Andre: … [inaudible 03:02:14] no evidence, and that matters to juries, too-
Speaker 16: It’s such a [inaudible 03:02:16] the details, and I don’t have it, and [inaudible 03:02:16]-
Andre: Then, the two cases that went to trial, there wasn’t the witness for the government-
Speaker 16: [inaudible 03:02:26].
Andre: … that had plead guilty to the charge offense.
Speaker 16: [inaudible 03:02:30].
Andre: That also matters to juries, that the cooperator that the government calls has actually accepted responsibility-
Speaker 16: [inaudible 03:02:37].
Andre: … for the same charge-
Speaker 16: [inaudible 03:02:41].
Andre: … but I’ll just digress a little bit and talk about some cases that are-
Speaker 16: Hey, can we get [inaudible 03:02:45]-
Andre: … from here, which is [inaudible 03:02:47] cases that [inaudible 03:02:50] brought up years ago. We had the Usher case-
Speaker 16: [inaudible 03:02:53].
Andre: … and we had the [inaudible 03:02:54] case. In one case, you have zero pleading cooperator. The other, you have several.
Speaker 16: I’m sure it would be what you want.
Andre: The differences were, I think, stark in terms of the jury verdicts. One was full of [inaudible 03:03:08]. The other one was conviction.
Speaker 16: [inaudible 03:03:10].
Andre: So, those types of witnesses matter.
Speaker 16: [inaudible 03:03:13].
Andre: In these labor cases-
Speaker 16: Oh, [inaudible 03:03:16]-
Andre: … I think a little bit of a [inaudible 03:03:18] problem, or at least there has been where-
Speaker 16: [inaudible 03:03:24].
Andre: … people are less likely to plead guilty-
Speaker 16: [inaudible 03:03:26].
Andre: … it’s a newer offense, and they don’t see past criminal convictions for that offense. So, it’s harder to get a guilty plea, but when you don’t get those guilty pleas, makes it harder to try cases [inaudible 03:03:38]-
Speaker 16: [inaudible 03:03:38].
Andre: … because you don’t have those cooperators.
Speaker 15: If you’re able to, can you talk a little bit about-
Speaker 16: [inaudible 03:03:46]-
Speaker 15: … the government’s response to the [inaudible 03:03:51] losses in this area? Are they still staying focused on it or if this has had [inaudible 03:03:56] effect?
Andre: Sure. Maybe Eric will want to chime in here, as well, but-
Speaker 15: Or maybe not.
Andre: … my observation is that the government has been clear that it won’t be dissuaded from bringing more of these cases and that they believe these are righteous cases, and they’re willing to lose if that’s what it takes. I think this still remains one of the division’s top priorities. So, I fully expect them to continue bringing these cases and being aggressive in those theories that they bring. A second point is, even though the trials [inaudible 03:04:35], those cases were involved after DOJ. What I’m trying to say is that the pretrial, there were motions to dismiss filed in those cases, and the DOJ won that litigation and got good rulings, affirming its legal theory that, for example, [inaudible 03:04:56] wage fixing is a form of price fixing. I think the Davita ruling was a little bit more mixed, but it did at least affirm that some types of non-solicitation agreements can be per se violations. The government also got a good ruling in the Patel case [inaudible 03:05:15], affirming its legal theories, again, in this case.
Speaker 15: Let’s take a minute for those who are civil litigators, like me, to talk a little bit about the civil litigation side of things. Dan, can you give us sort of a quick snapshot on what the private litigation landscape looks like? Then, I’d really love to hear your thoughts on this division between whether we should be thinking about those per se violation or perhaps it’s more appropriate [inaudible 03:05:45] reason.
Dan: Sure. I’d say, in the last five years, there has been a real noticeable uptick in these civil cases, and I’m mainly talking about class actions on behalf of employees, but for those interested, probably most important case to look into is the one … I think it was the DOJ’s first indictment has been high tech cold call, no cold case involving Apple, Adobe, Google, a number of other companies, that I think was litigated right … It settled maybe a month before trial. So, it was litigated pretty far, and it really established a roadmap for litigating these civilly. The economists’ work in there was really sophisticated and pretty, at the time, groundbreaking, and a number of cases that followed have really fallen down that path.
For those who are interested in looking into this, reading the class [inaudible 03:07:03] opinions from Judge Koh in the Northern District of California, three have already been dismissed. I think we give everyone a pretty good idea of the theories, armed [inaudible 03:07:15] armed and that sort of thing, but, recently, there’s been a number of follow-on cases from the DOJ, the aerospace engineering, Surgical Centers case. There’s various cases involving healthcare workers, Geisinger in Pennsylvania. There’s [inaudible 03:07:35] retail employees, truckers. Pretty much healthcare is a big player in this, but there’s broiler growers and broiler pig farmers.
Pretty much every industry, it seems, is touched by this, and I think it was maybe Andre’s point that a lot of these industries weren’t really aware that it was illegal to make agreements with your competitors not to solicit each other’s employees. They didn’t know never [inaudible 03:08:10] in the room with lots of antitrust [inaudible 03:08:12]. You never sit in the room and talk crisis with your competitors, but they had no problem talking about restrictions on hiring. I think you see even in the documents, a lot of them talk about it’s a win/win. Now, I mean, it’s, “We’re lowering our costs,” and that was how they viewed it. I would assume that’s all changed now [inaudible 03:08:41] multinational company or a company operating nationally [inaudible 03:08:46]. I think there’s a ton of these cases. Most of them are on behalf of employees’ class actions.
There’s one interesting one in California, Aya Healthcare versus AMN Healthcare, I believe, which was a competitor who sued this sort of dominant hospital traveling nurse staffing company, saying that they had forced the other traveling nurse staffing companies to enter into these [inaudible 03:09:23] made it basically impossible for rival staffing to refuse to operate. So, it was almost sort of an exclusive dealing, that restrictions on inputs to competitors, but I believe they lost on summary judgment, was affirmed by the 9th Circuit, on lack of injury rounds, among other things. It struck me as a pretty novel theory there, considering a [inaudible 03:09:58] was a competitor who entered into the agreement, but as far as I know, that’s the only one of those civil cases that wasn’t a employee side class action.
Speaker 15: Right. In your view, is this being litigated in the civil setting as per se violation? Are there mixed rulings that people need to be aware of?
Dan: I guess I’d characterize it as mixed in this sense. It’s pretty well established that if it’s a horizontal agreement and what they call a naked agreement, meaning not part of some greater pro-competitive effort, then I think it’s pretty well established per se. I think the courts say that a lot. Then, the question obviously focuses on some things seem like maybe the aerospace engineering [inaudible 03:10:55]. The organizer of the conspiracy was in a vertical relationship in some ways with the companies, but also competing with them. There’s always this tussling over whether it’s horizontal or vertical. Then, there’s franchise cases, like a McDonald’s case, where they say, “Well, franchise agreements are pro-competitive or at least ostensibly pro-competitive.” So, you just can’t just throw it in the per se bucket, but I would say for companies that are clear horizontal competitors, it’s probably per se if they’re agreeing not to compete for employees.
I would say one last point is Professor Posner talked about it, an agreement not to hire [inaudible 03:11:44]. It’s broader than that maybe, agreeing not to solicit. We can see companies will say, “Let’s tell our common recruiters not to go after people that are employed by us,” or, “No posting ads in our area,” or things like that that are, I would say, broader than just agreeing not to hire.
Speaker 15: Do you view of level of a type of labor issue as affecting this analysis, skilled workers, unskilled workers? There any sort of distinction there?
Dan: I don’t think there should be a distinction really, except I think maybe it leads a little bit into the relevant market analysis, and I think that is a big issue in that McDonald’s franchise case where, once the court found it should be analyzed under the rule of reason, then it became, “Well, do you limit it to McDonald’s employees, or are these employees also looking at much broader-”
Speaker 15: Right. There’s lots of fast food restaurants in geographic areas [inaudible 03:13:01]-
Dan: Right, and other things, but I think when you talk about aerospace engineers, that person is not going to take a working McDonald’s that there is a 5% non-transitory decrease in pay or whatever. I mean, I think it becomes easier to [inaudible 03:13:21].
Speaker 15: Right. I have a few sort of legal economic questions that really anyone on the panel can jump into. I do want to leave a few minutes, though, for the rest of the audience. So, maybe I’ll kick it off, and then we’ll see if there are other questions. From a plaintiff’s perspective in the civil side, what do you think the challenges are in pursuing no poach cases?
Dan: I think that Professor Posner talked a lot about the way a farm works for individuals, and I think there’s a separate component in a class action showing how that farm is widespread across the class. So, you think about it like, if two employers make an agreement not to solicit, I think the common defendant’s response is, “Well, you don’t even know if these people would have been solicited for taking another job,” but there’s sort of an economic body of literature about how just limiting those attempts to solicit people has both harms people who weren’t solicited and the harm [inaudible 03:14:47] spread across in these organizations because there’s pay bands. Maybe somebody would have gotten a pay raise because they would have been solicited. It wouldn’t because that one person getting a pay raise because you can’t have one doctor who is earning 20% more than the others on their pay bands to try to keep sort of pay equity. So, group-
Speaker 15: Is that so?
Dan: Yeah, I think so. I think that seems to be the case.
Speaker 15: Well, I guess we’ll see if the transparency [inaudible 03:15:22].
Dan: Yeah. I think it’s [inaudible 03:15:25] even at law firms. I mean, you think about law firms. There’s pay bands, and you maybe try not to have … for lots of reasons, equity among employees, discrimination concerns, recruiting, just concerns about employee satisfaction. You find that companies try to keep pay differences between people with different types of jobs or levels. So, maybe the highest, lower stage one engineer would be lower than the highest stage two, but it is challenging. The evidence and the economics is pretty challenging.
Speaker 17: There is actually literature on this [inaudible 03:16:20]. It shows that there’s very powerful pay equity norm. People get very, very angry if they learn that the employer’s paying people [inaudible 03:16:31] equal productivity different amounts. So, employers tend to avoid [inaudible 03:16:37].
Speaker 15: Andre, from the defense perspective, what are things that keep you up at night?
Andre: I don’t know if this keeps me up, but what I’m focused on from a defense perspective is trying to figure out where this line is between per se and [inaudible 03:17:03] reason. DOJ seems to be taking a more aggressive view these days compared to what [inaudible 03:17:10] views a per se violation. For example, the past administration, DOJ took the position that these franchise cases were essentially [inaudible 03:17:19] cases, but more recently, I think the DOJ’s position was having a franchise relationship doesn’t get you out of per se [inaudible 03:17:36]. I think you could still apply per se here. There’s actually this relatively [inaudible 03:17:38] court case in Nevada. It was a private case, but DOJ filed a statement of interest, arguing that even a non-compete with your employee can be a per se violation of the [inaudible 03:17:50] laws. That case involved a medical group and its anesthesiologists. Basically, the restriction was that if you leave the medical group, you can’t practice within 25 miles of a certain location. The DOJ called that a territorial allocation. Once you start talking about territorial allocations, you’re really starting to creep into the language of criminal interest.
So, at least in certain context, I think where professional services workers would have the capacity to kind of put up their own shingle, DOJ seems to be taking the view that those non-competes are perpetual per se violations. Again, taking aggressive [inaudible 03:18:44] per se. These criminal cases being litigated now, I’m paying close attention to how the ancillary restraints issue is going to be litigated. In the 26 [inaudible 03:18:59] guidelines, DOJ was clear. [inaudible 03:19:00] restraints, and you’ll see the defendant’s [inaudible 03:19:07] essentially arguing, saying, “Well, these are [inaudible 03:19:10]. These are ancillary restraints. Therefore, criminal prosecution is not appropriate,” but in its recent filings, I think the DOJ is taking the position that ancillary restraints is essentially affirmative defense.
Speaker 15: [inaudible 03:19:28].
Andre: So, something that the defendant will bear some burden proving, whether it’s the burden of production, showing some credible evidence that there was a legitimate collaboration. I’m not yet sure whether DOJ will take the position that the defendant also bears the burden of persuasion on this issue, but in a criminal case, that can have huge, huge implications in terms of the government’s burden of proof. If you read the government’s brief in the Patel case, opposing the motion to dismiss, there is language in there where, at least it appears to me that the government is going to take the wait and see approach and wait until later in the litigation to express its position on who bears the burden of persuasion on [inaudible 03:20:26].
Speaker 15: Do we have any questions from the audience? Before we got started, I heard-
Speaker 18: Yeah. At what point does the liability fall on the employer if they’re asking the employee to sign the no poach agreement? Is it at the time of drafting? Is it at the time of trying to enforce? At what point does the employer [inaudible 03:20:49]?
Speaker 17: Well, the employee has to sign the no poach, you mean? So, no poach agreement would be an agreement between one employer and another [inaudible 03:21:00]. You’re talking about a non-compete?
Speaker 18: Yes. Well-
Speaker 17: Or a no poach agreement?
Speaker 18: A no poach agreement between the two employers [inaudible 03:21:07] between the two employers. At what point is there the liability that [inaudible 03:21:11]?
Andre: It’s at the time of agreement. I think the law is fairly clear that it’s the agreement itself that triggers the offense, and you don’t even need to take any further steps from there to have at least technical liability. Of course, when DOJ brings cases, they want to show that the agreement was actually implemented because that pretty much [inaudible 03:21:38] to a jury, but on the technical line, [inaudible 03:21:42] to the agreement, there’s potential liability.
Speaker 15: Any other questions from the audience? Oh, there was someone who was threatening to ask very tough questions. All right. Well, let me ask another one.
Speaker X: Oh, there’s one [inaudible 03:22:02].
Speaker 15: We have one, good.
Speaker 19: [inaudible 03:22:02] that no poach agreements [inaudible 03:22:08]. Have you seen any difference [inaudible 03:22:14] approach or [inaudible 03:22:16] you don’t hire versus [inaudible 03:22:20]?
Speaker X: [inaudible 03:22:24].
Dan: I mean, I think it seems like the dominant paradigm sort of seems to be non-solicit, which is that they’ll say, “Well, if they employees comes to you, you can hire them, but what you can’t do is hire a recruiter [inaudible 03:22:47].” I think that most of the cases seem to fall under that paradigm. Maybe people seem to recognize that no [inaudible 03:23:00] like this agree not to hire somebody is bad, but then agree not to go after people is [inaudible 03:23:09] something like that because, a lot of times, solicitation doesn’t even result in the person leaving. It results in the person going to their employer and saying they were solicited and getting a pay raise from that employer. So, it’s not really restricting mobility as directly. I don’t know. I think most of the ones I’ve seen are the partly non-solicit type, and they’re not usually written. It’s with HR professionals talking amongst or higher up be talking amongst [inaudible 03:23:41] agree not to go after each other’s employee.
Speaker 17: Yeah. There’s a lot of variation, and the original [inaudible 03:23:49] cases you mentioned, it was just an agreement not to make phone calls, which it seems quite like a modest sort of thing. The franchise ones are [inaudible 03:24:00] and literally say, “You can’t hire an employee of another franchise.” I think there’s quite a lot of variations [inaudible 03:24:09], and they’re all treated the same as [inaudible 03:24:13] per se.
Speaker 15: I think, if my watch is accurate, we have time for one more question. Any questions? What about safe harbors? Shouldn’t there be safe harbors in [inaudible 03:24:32]?
Speaker 17: No. There is a safe harbor business, and safe harbor [inaudible 03:24:42], which I think there should be more attention to that as a result of for this classification [inaudible 03:24:52] have to deal with what happens when independent contractors try to get [inaudible 03:24:59] and are [inaudible 03:25:02] forming a cartel [inaudible 03:25:06]. That’s an issue maybe down the road, but not a safe harbor [inaudible 03:25:13]. What do you think, Andre?
Andre: Yeah. I don’t know if it’s a safe harbor itself, but I think it would be helpful to have at least some working therapy on what is a naked restraint versus what’s an ancillary restraint, to have DOJ use those two categories. They have pretty big implications, depending on which bucket you fall into. So, whether it’s through guidance or cases, I think it would be helpful for companies that are, I think, trying to do the right thing, trying to educate your workers [inaudible 03:25:54].
Speaker 15: Well, what if we talk a little bit about the FTC and the announcement about non-compete agreements? This is sort of adjacent to the no poach issue, but you brought it up, as well, I think, Andre. If we’re thinking about traditional non-competes in lawyer and labor market, companies routinely have that to protect themselves, to protect the business. The FTC is now suggesting that we should prohibit non-competes in most situations. What effect do you think that will have on this type of litigation in the way we think through the no poach analysis?
Speaker 17: Well, I mean, a lot of these antitrust [inaudible 03:26:44]. I guess any antitrust cases involving the non-competes will become a lot simpler. Won’t they? In fact, will just disappear. I guess the no poach cases will be unaffected. Maybe courts will be more sympathetic, to some extent. I’m not sure. I’m not interested in this issue of whether antitrust law has been or should be used to challenge non-competes, and there’s a lot of history of failed efforts.
Often, employers, sorry, employees have need to escape non-competes impact on to terminate claims to the common law claim, and this loss [inaudible 03:27:32] have always been very unsympathetic to antitrust clients. I honestly think that I’ve argued that it would make a lot more sense, I think, for courts to adjudicate [inaudible 03:27:46] because, often, they do have anti-competitive effects [inaudible 03:27:51] effects. The MPC rule that kind of just get rid of this whole issue [inaudible 03:27:58] non-competes generally. Whether the rule makes sense or not is, I believe, kind of question is too big for us to address now. I’ll just say, whether it does or not, this is a [inaudible 03:28:13] question. There’s a very [inaudible 03:28:14] interesting [inaudible 03:28:15] answers [inaudible 03:28:18] that just basically looks at whether non-competes [inaudible 03:28:21] have the effects that have generally had good or bad [inaudible 03:28:22], and the FDC argues that [inaudible 03:28:33], which I think is a reasonably plausible [inaudible 03:28:37], but [inaudible 03:28:39] to see.
Speaker 15: You think, Andre?
Andre: Well, I guess the way I think about it is, if you’re an employer and you have reasons to try to restrict what workers might do, whether you’re trying to protect trade secrets or have some other justification, you really have two options. One is a non-compete for the worker or some form of no poach, possibly a non-solicit with another company. Again, maybe in these example of the staffing agency and the customer, if you don’t want them to steal all the employees that you’re providing, then you might enter into an agreement with them. Those are the two avenues. If one essentially is foreclosed by the FDC rule, what I wonder is, does that create more pressure to enter into the second [inaudible 03:29:32] trying to find a legally permissible way to do some form of no poach, again, for … I don’t think companies are going to try to find valid business reasons to do that, but if you got two options, and one of them goes away, then it creates incentives to try to find something that works within the second option.
Dan: But you can still protect your trade secrets with trade secret law. So, if your concern is that your-
Jerry: … writ law. So if the concern is that your employees might steal the effects of this agreement to others, you’ll still have the option, even if the FTC rule is issued and upheld by the courts to sue in state court to enforce your transfer writ laws, and even get your ex-employees out of jail, that billable employee who tried to the… What was it?
Meeting Mbr 1: Autonomous driving?
Jerry: The autonomous driving technology.
Meeting Mbr 2: Yeah, I think that’s true, Jerry. I think the challenge with advising companies on those types of issues is there’s a challenge in enforcing any rights there, because, one, what your employee is doing, if you’re a new company is very opaque to you, right? They may be working in the same general area, but you can’t see what they’re actually doing. Are they providing the confidential information to their new employer or are they not? It’s a very opaque thing. And the only way you can truly enforce it is to initiate litigation, which can be very costly and very distracting. So I think a lot of companies would prefer some kind of prophylactic measure where you don’t have to sue, and get into potential years of litigation to be vindicated on that issue.
Kaci Palleschi: Does the FTC contemplate that you could have temporal restrictions? So perhaps the noncompete could last for-
Jerry: No, no, no, it just completely bans them.
Kaci Palleschi: Completely bans.
Meeting Mbr 4: Hasn’t that been that the case in California for years?
Jerry: Yeah, yeah. There’s a lot of… The thing that’s argued that, I guess it’s on the PH, which is that California has been where Silicon Valley is located, the most innovative region in the world, has managed to be innovative the fact that non-competes are not enforced. Technically, the non-competes are essential for any litigation. Of course, that’s just one state. It’s an anecdote, it’s not something you could argue, but it’s rather compelling.
Kaci Palleschi: Any other questions from the audience? Okay. I think we are close. Mary, do you think we can break for lunch?
Mark Marks: Thank you. That now concludes the morning CLE session, so please make sure to fill in your pull-out and turn in, I think, it’s the bottom half or the top half of, I think it’s the green form, Kaci will tell me if it’s yellow. In any event, the CLE form, turn in the morning session as you leave.