Articles Discussing Restrictive Covenants In The Workplace And Other Topics Relating To Unfair Competition.

By: A No-Go for Employees’ Anti-Trust Claims Based on High-End No-Hire Agreements

Recently, the United States Court of Appeals for the Second Circuit upheld the dismissal of a class action against defendants Saks Inc., Gucci, Prada, Loro Piana, Brunello Cucinelli and other luxury good manufacturers.

The Plaintiffs claimed the luxury good manufacturer defendants violated Federal Anti-Trust laws by entering into no-hire agreements with Saks. In 2023, we noted that the State of California came to the defense of the employees joining an amicus curiae brief.  

The agreements at issue were entered into between the luxury good defendants and Saks as the luxury good defendants agreed not to hire employees who were employed by Saks within the previous six months, unless managers from both companies approved the hire. Plaintiffs claimed that such agreements restrained competition, suppressed wages, and limited employee mobility.

The Court of Appeals agreed that the trial court got it right under several levels of analysis, so it’s a no-go on the employees’ appeal.

The Court of Appeals concluded that these were not per se unlawful because the agreements were not horizontal restraints on trade, and primarily impacted the vertical relationships among the luxury good defendants and Saks.  

The Court then applied the Rule of Reason analysis to the Complaint and concluded that the plaintiffs failed to show an actual adverse effect on competition in the marketplace. It was not enough to show that a specific plaintiff was harmed, but they failed to demonstrate an adverse effect on competition market-wide. The Court reviewed the operative complaint and found that it alleged harm in a purely conclusory manner without specific allegations that there was national market-wide suppression of compensation or mobility among all businesses employing such workers.

The Court of Appeals did not mention amicus briefing from any of the State Attorneys General.

What Employers Should Do In Light of This Decision

Employers need to be cognizant that this case was adjudicated under the Federal Sherman Act, many states, like California have their own anti-trust laws that may be interpreted differently.

Employers seeking guidance on no-hire, no-poach or covenants not to compete involving California employees should seek counsel, including Dan M. Forman and CDF’s Trade Secret Practice Group.

For 2025, and perhaps beyond, the writing appears to be on the wall for true non-competes. Prudent employers looking down the road should make sure they are doing what they can to strengthen their other restrictive covenants and protection of confidential information and trade secrets. 

“All of this is to say that for 2025, and perhaps beyond, the writing appears to be on the wall as to true non-competes. They, whoever they are, are coming for employers who are aggressive in their choice of which employees are bound by true non-competes, the extent of the restrictions and the enforcement actions taken.”

Labor and employment attorney Mitchell Greggs discusses the latest news regarding the FTC’s Non-Compete Rule and how employers can navigate the changing developments.

By: FTC Appeals Injunction Against Final Rule Banning Non-Compete Employment Agreements

Last Friday, the Federal Trade Commission (“FTC”) gave notice to appeal Judge Brown’s nationwide bar on the FTC’s final rule creating a Non-Compete Ban or enforcement of the rule in the case of Ryan LLC v. Federal Trade Commission. This appeal followed another appeal by the FTC of an adverse ruling from Properties of the Villages, Inc. v. Federal Trade Commission.

While it is still early days on the appeals, because the Ryan appeal is within the Fifth Circuit and the Villages appeal is within the Eleventh Circuit, conflicting opinions could result. And, if there are conflicts among the Circuit Courts, the United States Supreme Court will likely give the last word as to whether the FTC’s ban must be followed or not.

For the moment, employers are relieved from any Federal rules in this area but should continue to monitor and ensure compliance with state laws governing non-compete agreements in the employment arena.

If you need assistance with determining the enforceability of non-compete agreements, please reach out to Dan M. Forman or your favorite CDF attorney.

Related links:

The recent SCOTUS Loper Bright decision, the FTC’s final rule banning non-competes, and ongoing litigation may present significant challenges for employers enforcing non-compete agreements.