The Demise of Non-Solicitation Agreements

Oct 2, 2014 12:00:00 AM · by David Kushan

Nothing can be more disruptive to an organization’s plans than the loss of key personnel. As a result, many times partnering organizations, vendor/clients, client/client, and even competing organizations will put in place formal and informal “agreements” to not hire each other’s employees. These types of agreements have existed for many years within various industries, Healthcare IT certainly being one of them. In fact, over the past couple of years, some Healthcare IT vendors and consulting firms have been very aggressive in establishing policies as it relates to hiring practices.

The most common of these types of agreements is as simple as two organizations agreeing to not hire each other’s employees. Others may consist of a vendor telling its clients that they cannot hire from their other clients, due to the disruptions that may be caused to current projects.

Not much consideration is given to the limitations this puts on the people who may want to take advantage of career opportunities within the organizations with which their current employer has such agreements.

Many of the organizations with which our firm works have been very proactive in adding to their staffs over the last six months and are now looking to implement policies with the hopes of retaining their current staff for the long haul. What may make things more difficult is a September 2010 settlement by the Department of Justice:

On the Department of Justice Web site, it states:

“In September, the Department of Justice announced that it has reached a settlement with six high technology companies — Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar — that prevents them from entering into no solicitation agreements for employees. The department said that the agreements eliminated a significant form of competition to attract highly skilled employees, and overall diminished competition to the detriment of affected employees who were likely deprived of competitively important information and access to better job opportunities.”

The agreements the six organizations had in place did not prevent them from “hiring” each other’s employees. If an employee from one of the organizations were to apply for a job on their own, the company to which they applied could hire them. They were in agreement only to not solicit each other’s employees. The Department of Justice had a problem with just the “non-solicitation” part of the agreement and how that could affect the employee’s options and value in the marketplace.

With this ruling, employers have a few fewer tactics to prevent or limit turnover. As these types of agreements are dissolved, what impact will it have on an already competitive Healthcare IT employment market?

You may also like: What About the Second Contract?

General, Career Planning, Hiring, David Kushan


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