In a press release that just went out yesterday, New York’s Attorney General, Leititia James, announced that the State reached an agreement with AmTrust Title Insurance Company and First Nationwide Title Agency (together AmTrust), whereby the two entities agreed to pay a penalty of $1.25 million for using “no-poach agreements” whereby each agreed not to hire each other’s employees for a prolonged period of time.
From the Attorney General’s perspective, which is outlined in the agreement they reached with AmTrust, here's what was wrong with these horizontal no-poach agreements:
6. ''No-poach Agreements" are agreements among two or more companies not to solicit, recruit or hire each other's employees; these agreements can be written or verbal. In a well-functioning labor market, employers compete to attract the most valuable talent for their needs. No-poach Agreements reduce competition for employees and disrupt the normal compensation-setting mechanisms that apply in labor markets, to the detriment of the affected employees who may be deprived of competitively important information and access to better job opportunities.
Moreover, according to the AG, these agreements - which were sometimes verbal, and other times written - which pertained to the commercial title insurance industry, violated antitrust laws because they could not identify any pro-competitive justification for these agreements, and were often intended to last even after the term of any business relationship has ended. At its core, the Attorney General believed these no-poach agreements were problematic because
"These agreements effectively end competition for Employees between AmTrust and the Agency or underwriter, including competition in New York."
The upshot, or takeaway is this:
As we outlined just a few days ago in "NLRB Announces Memorandum of Understanding with FTC to Help Curb Use of Non-Competes," the writing for employers, particularly large ones, like AmTrust, is on the wall, at least for the foreseeable future:
The government, at both the federal, and as here, the State level, is actively looking for any means at their disposal to curtail the use of any form of non-compete agreements, and is going to aggressively pursue this course of action, which could include the imposition of heavy penalties, like the seven-figure one that was just handed out to AmTrust. So, employers, beware.