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Management Trainer & Life Coach
Learning & Teaching Fellow (retired)

Dear Folks, today I wanna discuss with you on “Non Poaching Agreement” which I suppose a really important thing to discuss and we all need to aware of this.

Well, to start with the definition on this, what this “Non Poaching Agreement” is all about, I wanna say that we use this agreement for much purpose or with many formats according to our needs and by this we indicate that at least two companies have agreed that none will prey upon another business employees or clients. These may also be called non-solicitation agreements, notes the Practical Law Company, which may be made amid concerns about competition between companies.

Such agreements place significant post-employment restrictions on what type of work an employee can perform and where the employee can perform that work. Because these agreements provide a bright-line test (either the employee is competing or he's not), little, if any, investigation need be undertaken before a company can ask a court to enforce the agreement. For that reason, noncompete agreements are considered the best available tool for a company to protect its legitimate business interests (primarily, the protection of trade secrets, confidential business information and goodwill).

Even so, because of the impact that these agreements can have on an employee's ability to find gainful employment, many courts are loath to enforce. This is more true now, when employees are being laid off at record levels and are lucky enough to find any job -- much less one at a company that does not compete with their prior employer.

This circumstance has left some companies scratching their heads about how to protect themselves from employees who have left to join direct competitors. Enter the no-hire agreement.

Traditionally, no-hire agreements fell into two broad categories: first, an agreement by which a company agrees with another company not to hire the other company's employees; and second, an agreement by which an employee agrees not to hire his former co-workers after he changes jobs. These agreements arise in the context of some ongoing relationship -- either some type of joint venture, consulting agreement or other business arrangements between the companies or an employment relationship.

It is an agreement by two unrelated companies to not poach each other's employees. While this can be viewed as a bit of an end run around noncompete agreements, the impact of a no-poach agreement is far less detrimental to the employee. Specifically, unlike a noncompete agreement, which prohibits an employee from working for any competitor, no-hire agreements -- to the extent that they are not part of a larger scheme among multiple companies -- merely bar employees from only one potential employer. From this standpoint, such agreements would appear to be a better alternative to a noncompete from a restricted employee's and a court's standpoint.

That is not always the case, however, and the problem with no-poach agreements is potentially manifold. First, the agreements are likely to be held to the same standards as noncompete agreements. Specifically, a court is unlikely to enforce the agreement where it is not reasonable and necessary to protect both companies' legitimate business interests. Second, particularly where the companies are dominant in their market, they could run afoul of antitrust laws (the laws that make it unlawful for some companies to engage in concerted anticompetitive activities). Accordingly, they must be carefully considered if there is a chance that the companies will be viewed as having violated these laws. Third, the agreement has the potential to be quite pernicious insofar as it may be entirely unknown to the employee. Accordingly, employees of both companies may be under restrictions of which they were unaware and to which they never agreed.

So, what is a company to do? While a company may be able to get away with a secret no-poach agreement, history shows that that is unlikely to last -- and a company can face significant unanticipated negative ramifications from participating in such undisclosed agreements. Thus, to minimize these risks and the perceived unfairness of these agreements, and thereby maximize the likelihood that the agreements will be enforced, the first step is to make the agreements known, have employees acknowledge that they are aware of the agreements, and require that the employees agree to be bound by the agreement. Such agreements still may not fly in California, but they will have a better chance of enforcement in other states. Second, use the agreement as a supplement -- not an alternative -- to other restrictive covenants (noncompete agreements, nonsolicitation agreements, traditional no-hire agreements, nondisclosure agreements and the like). Simply put, while a court might be disinclined to enforce one of the agreements, it may be more inclined to enforce another. Accordingly, using all that applies provides backstops to a court's refusal to enforce the more restrictive of the agreements. In that vein, the benefit of this approach is that the argument can be made that the no-poach agreement is very narrowly tailored to protect both companies against the unfair competition in only one respect: each other. When these two companies are direct competitors, such an argument is likely to carry some weight with a court. Hope to get your views, suggestion and this information will be beneficial for other peoples.

For Sample formats or more you can also visit websites/article below -

Attached Files
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File Type: pdf Restrictive_Covenants.pdf (634.5 KB, 1196 views)
File Type: pdf LaborBulletin-IssueXI10062010111939AM_1288787650.pdf (99.8 KB, 190 views)
File Type: pdf Employee Poaching 123.pdf (221.6 KB, 1408 views)

Although I acknowledge the rational behind poaching agreement I dont quite agree if that is the right tool to encourage employees to be loyal.

One problem that comes into mind is at the time of recruitment, are/will the candidates who apply for a job at that company be made aware of such poaching agreements with other companies? That in addition to the bond agreement of 2 years encourage freshers look for better opportunities even after they have been placed in companies that have such agreements. The obvious question that comes into mind is why does this company gate-keepers preventing employees from leaving? Why do employees want to leave in the first place?

I had a case where (like many IT companies) a whole team of around 15 was poached. This created a huge void in the company as its total strength was around 100. The complaint by the employee was "they only know how to get work done without paying enough" Their pay was definitely lower than other companies in the area.

The truth is most employees are more than happy to stick to one company. Companies must put more effort in individual development (like teaching them about finance, investment etc) and brand loyalty.

Coming back to non-poaching agreement, it is definitely needed at higher levels such as management, R&D and maybe even marketing ie the top 30% in the hierarchy. Implementing it for the lower 70% would be as complex as it would be detrimental to the brand image of the company for attracting potential employees.

Avinash Tavares

Management Trainer & Life Coach

<link outdated-removed> ( Search On Cite | Search On Google )
Yah thanks but actually it is based on a article by Russell Beck
| Computerworld New Zealand <link updated to site home>
Hope to get more views/suggestion on the same by our other members.

Dear Anil,
Thank you for inviting me to comment. As this is a legal issue, I am not able to contribute much. Please see Employee Poaching - Employee Poaching Definition
Have a nice day.
Hi can someone help me with the clauses in a no poaching agreement
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