Competing For Employees

It is well understood that resellers compete with each other, and often their supplier, for the sale of equipment, service, support, and supplies. As competitors it is illegal to enter an agreement with a competitor to fix or maintain prices, divide territories, or allocate customers. RSPA has strict antirust compliance rules and emphasizes them regularly. These restrictions are not limited to the point-of-sale systems market place, but extend to competition for employees as well.

Recently the Department of Justice and the Federal Trade Commission issued written guidance for human resource professionals on how the antitrust laws apply to employee hiring and compensation decisions. The Guidance makes it clear that workers are entitled to the benefit of competition for their services. Agreements among employers to fix wages or other terms of employment, and agreements not to recruit each other’s employees are likely to be considered per se violations for which the agreement itself is the violation and no defenses can be raised. The agreement is illegal regardless of the employer’s motives—such as lowering costs to customers. An agreement can be formal or informal, written or verbal. The mere invitation to enter an illegal agreement may violate the antirust laws. Finally, there are incentives for turning in those that participate in such conduct.

Resellers are always concerned that one of their customers will seek to employ a technician familiar with its equipment or system and avoid maintenance and support charges. To combat this fear many industry agreements contain language similar to this:

NON-SOLICITATION/NON-HIRER.  Customer agrees not to solicit, hire or otherwise engage in any manner whatsoever, directly or indirectly, any of the Reseller’s employees in the position of Support or Service Technician, Installation and Support Specialist, Project Manager, or Service Manager from the date of this Agreement and for a period of two (2) years following the expiration or termination of this Agreement.  If the Customer violates this provision, the Customer shall pay Reseller the sum of one year’s direct salary of each employee hired or engaged as liquidated damages and not as a penalty. 

It would appear that restrictions such as this would run contrary to the Government’s Guidance. The requirement to pay one-year’s salary would tend to affect the employee’s right to a competitive marketplace. If two employees were available for the position, and one was not subject to the payment, surely that employee would be more desirable. If the customer agreed to this provision in a sales agreement or a Reseller in a supplier agreement, they could face a civil claim from the employee and criminal or civil charges from the government. The better approach may be to have the employee sign a non-compete, non-solicitation, and/or a non-disclosure agreement. In this way the employee is limiting his or her own marketplace. Of course which approach is taken will depend upon the State in which you are located for some states restrict non-competition agreements.

Sharing compensation and benefit information may also be illegal according to The Guidance. Many jurisdictions are forbidding a potential employer from asking an individual’s previous compensation. It is felt that the employer will use this information to establish compensation rather than the individual’s qualifications and duties. If such information is to be shared it is best to do so through a third party as part of a benchmarking exercise where historical data is used and cannot be attributed to a specific employer. Benchmarking information can provide employers with industry averages for specific positions.

The Trump Administration is examining many existing rules and guidelines with a goal to aid business and not curtail it. Thus, The Guidance may change. As always RSPA will keep you advised and the Legal Hotline is always available to answer any member questions.