No-Poach Agreement Explained: The 2026 Legal Guide

What Is a No-Poach Agreement and Is It Legal?

A no-poach agreement is a company-to-company arrangement in which two or more competing employers agree not to recruit, solicit, or hire each other's workers. Under Section 1 of the Sherman Antitrust Act of 1890, a naked no-poach pact between horizontal competitors is treated as per se illegal — meaning courts presume it is anticompetitive without requiring proof of actual wage suppression or job losses.

Key takeaways

• A naked no-poach agreement between direct competitors is a per se antitrust violation and can trigger felony prosecution under the Sherman Act.
• The January 2025 DOJ/FTC Antitrust Guidelines for Business Activities Affecting Workers extended no-poach scrutiny to franchise agreements, independent contractors, and oral or implied understandings.
• Apple, Google, Intel, and Adobe paid $415 million in 2015 to settle a class action covering 64,466 workers whose wages were suppressed by their no-poach cartel.
• A non-solicitation clause binding an individual employee is an employment-law matter, not an antitrust matter — this distinction is critical for contract drafters.
• No-poach clauses hiding in services agreements, MSAs, and outsourcing contracts carry the same legal risk as a standalone no-poach pact.

Are No-Poach Agreements Illegal Under U.S. Law?

The short answer is: a naked no-poach agreement almost certainly is. The longer answer requires understanding two legal concepts — per se treatment and the ancillary restraints doctrine.

Per se illegal. The DOJ states that wage-fixing and no-poaching agreements are "per se illegal under antitrust laws." Per se illegal activity is activity that does not need to be investigated for the scale of harm — it can simply be viewed as illegal if it took place. An employee does not need to establish that the activity is unreasonable or that it had specific negative consequences for compensation or career advancement.

The governing statute. On the federal side, the Sherman Antitrust Act — a federal statute that historically provided private plaintiffs the means to recover damages for anticompetitive activity — has various provisions, including allowing private plaintiffs potentially to recover treble or triple damages for whatever injury they suffered. Criminal penalties under the Sherman Act reach up to 10 years' imprisonment and $1 million in fines for individuals.

The 2025 guidelines. On January 16, 2025, the Justice Department and Federal Trade Commission jointly issued Antitrust Guidelines for Business Activities Affecting Workers. The guidelines, which replace the 2016 Antitrust Guidance for Human Resource Professionals, explain how the Justice Department and FTC identify and assess the antitrust risks of business practices affecting workers. The guidelines set forth certain key principles: an agreement need not be explicit or written down in order to violate the antitrust laws. An agreement can be illegal even if it is never carried out. The agencies will treat some agreements as illegal regardless of their effects, such as wage fixing or no-poach agreements.

Ancillary restraints exception. Not every restriction on hiring is automatically illegal. A "no-poach" agreement may be lawful under the "rule of reason" if it is reasonably necessary to promote a collaboration — for example, a provision inside a joint venture preventing each partner from poaching the other's key engineers during the project's term. Courts weigh the competitive harm against the legitimate business purpose.

The Decision Table Every Contract Drafter Needs

Most articles treat no-poach law as a binary — illegal or legal. Reality is a spectrum with three zones. Use this table to map your situation before signing or inserting any restriction on hiring.

The last row is the critical insight most guides miss. The difference is that a no-poach agreement is between companies competing for employees, while a non-compete is between employer and employee. Add the word "non-solicitation" and the same logic applies: these no-poach agreements are different than, for example, agreements between an employer and its workers that prevent the workers from soliciting clients or vendors at a future employer or for a future competing business.

If you need an employee-facing restriction, read our guide to non-solicitation clauses and pair it with a well-drafted employment agreement — neither document creates antitrust exposure on its own.

The Real Cost: A Worked Example from Silicon Valley

Abstract legal principles become concrete when you look at what actually happened when tech giants got this wrong.

High-Tech Employee Antitrust Litigation is a 2010 U.S. Department of Justice antitrust action and a 2013 civil class action against several Silicon Valley companies for alleged "no cold call" and no-poaching agreements which restrained the recruitment of high-tech employees. The defendants were Adobe, Apple Inc., Google, Intel, Intuit, Pixar, Lucasfilm and eBay. The civil suit accused the tech companies of collusion between 2005 and 2009 to refrain from recruiting each other's employees. A 2025 study found that this collusion reduced wages at the colluding firms by 5.6%, reduced stock bonuses for employees, and led to worse job satisfaction.

In 2015, Google Inc., Apple Inc., Adobe Systems Inc., and Intel Corporation agreed to $415 million in settlements. Prior to that, Intuit Inc., Lucasfilm, Ltd., and Pixar agreed to separate settlements totaling $20 million. The suit exposed the practice by major tech industry players which allegedly collaborated not to poach each other's employees. The approximately 64,466 workers affected by the poaching scheme collected about $5,770 each on average.

The mechanism was simple: senior executives, including the late Steve Jobs, maintained lists of companies whose employees were off-limits. As evidence of the alleged agreements, the SCA indictment cites emails between companies, including an email in which one co-conspirator's CEO emailed employees: "I had a conversation w [SCA's CEO] re people and we reached agreement that we would not approach each other's proactively." An informal email from a CEO counted as an illegal agreement. No signed contract was required.

A follow-up set of lawsuits for animation and visual effects employees was settled for $168 million in 2016.

Beyond Silicon Valley, Duke ended up paying $54.5 million to settle a class action alleging a no-poaching agreement between Duke and the University of North Carolina. The DOJ filed a statement of interest in the litigation and the settlement included provisions for the DOJ to monitor compliance and enforce its terms.

State enforcers are active too. In late October 2023, the New York Attorney General's Office announced a $4.5 million settlement with First American Financial Corporation, one of the nation's largest title insurance companies, after a NYAG investigation discovered that First American entered into illegal no-poach agreements with several of its competitors, agreeing not to solicit each other's employees.

The Mistake-and-Fix: What Bad Drafting Looks Like

The most dangerous place for a no-poach clause is inside an otherwise routine commercial contract — an MSA, services agreement, or outsourcing deal — where it escapes legal review because nobody flags it as an antitrust provision.

The problematic clause (do not use):

"During the term of this Agreement and for two (2) years thereafter, neither Party shall directly or indirectly solicit, recruit, or hire any employee of the other Party."

This language covers the entire workforce of both companies, lasts two years after the contract ends, and contains no carve-out for employees who apply spontaneously. If the two companies compete for workers in any labor market — even a different one from the products or services they sell — this clause functions as a naked no-poach agreement regardless of what the contract is titled. These no-poach agreements need not completely prohibit hiring another company's workers to violate the law. Any agreement to restrict a company's ability to hire another company's workers, such as an agreement not to "cold call" another company's workers or to require permission from the current employer before hiring an employee, may constitute an unlawful no-poach agreement.

The safer rewrite:

"During the term of this Agreement, neither Party shall directly solicit or recruit any employee of the other Party who is personally engaged in performing services under this Agreement. This clause does not restrict either Party from: (a) hiring any individual who responds to a general advertisement or job posting; (b) hiring any individual who initiates contact without prior solicitation; or (c) hiring any individual who has not been employed by the other Party for at least six (6) months."

The rewrite limits scope to workers actually on the engagement (an ancillary, project-related justification), carves out inbound and general advertising, and contains a post-employment gap. It still carries some risk and warrants antitrust counsel review, but it is not a naked labor-market carve-up between competitors. You can generate a services agreement with Pactlio and flag any mutual non-solicitation clause for attorney review before signing.

How No-Poach Rules Apply in the Franchise Context

On August 25, 2023, Judge Easterbrook of the Seventh Circuit penned a highly anticipated decision in Deslandes v. McDonald's USA, LLC, involving ongoing efforts by fast-food restaurant employees to challenge no-poach provisions in franchise agreements. The court reinstated claims by two former McDonald's employees that no-poach provisions in franchise agreements violate Section 1 of the Sherman Act as per se unlawful restraints.

The 2025 DOJ/FTC Guidelines state that an agreement between a franchisor and franchisee not to compete for workers can be per se unlawful, and a franchisor organizing or enforcing a no-poach agreement among franchisees may itself violate the antitrust laws.

Washington State is the most aggressive jurisdiction. All no-poach provisions in franchise agreements are per se violations of Washington's antitrust laws. This initiative eventually reached all franchise systems that have a significant presence in Washington State, including those in industries such as automotive services, child care, cleaning services, convenience stores, home healthcare services, hotels, tax preparation, and travel agencies. By the initiative's close in early 2020, the Antitrust Division investigated hundreds of franchise systems.

If your business uses franchise agreements, have every version reviewed for no-poach language. See our guide to non-compete law by state for jurisdiction-specific requirements beyond federal standards.

No-Poach Enforcement by Jurisdiction (2025–2026)

In Australia, the Treasury is consulting on proposed amendments to the Competition and Consumer Act 2010 that would explicitly prohibit no-poach and wage-fixing agreements. If enacted, the ban would apply from 2027, with civil penalties of up to AUD 50 million and potential criminal sanctions.

In February 2026, the Dutch competition authority (Autoriteit Consument & Markt) launched an investigation into an IT company for suspected agreements with other companies not to approach or hire each other's employees.

For businesses operating across borders, review your agreements against the specific rules of each jurisdiction before expanding. Our guide to international contracts and jurisdiction explains how multi-country agreements should handle governing law.

What Employers Can Legally Do Instead

You don't have to choose between letting competitors raid your team and breaking antitrust law. Three lawful alternatives exist:

1. Employee-facing non-solicitation clauses. Add a provision to your employment agreements prohibiting departing employees from recruiting their former colleagues. Limit scope to people they actually worked with, cap duration at 12 months, and carve out general job postings. This is an employment law tool, not an antitrust issue. Review how to write non-compete and non-solicitation provisions for state-specific guidance.

2. Invest in retention. Employers could make their positions more attractive through offers with higher compensation, benefits, working conditions, and the like. This type of retention activity is procompetitive and could preempt departures. Competitive pay, equity, and development programs keep employees without touching antitrust law.

3. Ancillary restrictions tied to a specific deal. If you're entering a joint venture, M&A transaction, or long-term outsourcing engagement, a narrowly tailored mutual non-solicit limited to employees who work on that specific project — and only for the project's duration — may survive rule-of-reason review. Get antitrust counsel to review the clause before the contract is signed. You can create a services agreement or contractor agreement with Pactlio as a starting draft, then have your attorney evaluate any mutual hiring restrictions.

The FTC's blocked noncompete ban also remains a relevant background issue. See our FTC noncompete rule 2026 update for where that litigation stands and what it means for restrictive covenants generally.

Common Mistakes to Avoid

• Assuming a verbal agreement doesn't count. An agreement need not be explicit or written down in order to violate the antitrust laws. An agreement can be illegal even if it is never carried out. A CEO-to-CEO call agreeing not to poach engineers is an illegal pact.
• Conflating company-to-company no-poach with employee-facing non-solicitation. They are governed by entirely different bodies of law. Mixing them up in one clause can make a lawful non-solicit look like an illegal cartel.
• Letting boilerplate mutual non-solicitation cover the whole workforce. Broad language in an MSA or services agreement that sweeps in every employee of both companies is indistinguishable from a naked no-poach agreement.
• Thinking the DOJ's criminal trial losses mean no-poach enforcement is waning. The Division has not, in any manner, repealed its policy of viewing no-poach and wage-fixing agreements as criminal conduct. The risk of criminal investigation and prosecution remains, and state attorneys general and private civil plaintiffs continue to challenge the use of no-poach agreements.
• Ignoring franchise context. If your franchise agreement contains a provision preventing franchisees from hiring each other's workers, it may be illegal in Washington State and faces active scrutiny federally under the 2025 guidelines.
• Not extending antitrust training to HR. Companies should extend antitrust compliance training to HR departments, recruitment teams, and personnel who participate in industry forums or professional networks. The risk often originates with an informal conversation at a trade show, not in the legal department.

Sources

• Sherman Antitrust Act of 1890, 15 U.S.C. § 1: https://www.law.cornell.edu/uscode/text/15/1
• DOJ/FTC Antitrust Guidelines for Business Activities Affecting Workers (January 16, 2025): https://www.ftc.gov/system/files/ftc_gov/pdf/p251201antitrustguidelinesbusinessactivitiesaffectingworkers2025.pdf
• FTC press release, January 16, 2025: https://www.ftc.gov/news-events/news/press-releases/2025/01/ftc-doj-jointly-issue-antitrust-guidelines-business-practices-impact-workers
• DOJ Antitrust Division, "No-Poach Approach" (Spring 2019): https://www.justice.gov/atr/division-operations/division-update-spring-2019/no-poach-approach
• In re High-Tech Employee Antitrust Litigation, No. 11-CV-02509 (N.D. Cal.) — settlement approval: https://uk.practicallaw.thomsonreuters.com/2-603-5827
• Seaman v. Duke University, No. 15-cv-00462 (M.D.N.C.) — $54.5M settlement: https://www.bressler.com/news-DOJ-brings-criminal-enforcement-actions-related-to-no-poaching-and-wage-fixing-agreements
• Deslandes v. McDonald's USA, LLC, 2023 WL 5496957 (7th Cir. Aug. 25, 2023): https://www.manatt.com/insights/newsletters/client-alert/fresh-off-the-grill-no-poach-agreements-may-lead-t
• Washington State AG, Labor and Antitrust: https://www.atg.wa.gov/labor-and-antitrust
• K&L Gates, "DOJ Jettisons Its Last Criminal No-Poach Prosecution" (December 2023): https://www.klgates.com/DOJ-Jettisons-Its-Last-Criminal-No-Poach-Prosecution-but-Antitrust-Scrutiny-of-Labor-Markets-is-Here-to-Stay-12-21-2023
• Ashurst Perkins Coie, "No-Poach Agreements in the Crosshairs" (2026): https://www.ashurstperkinscoie.com/en/insights/no-poach-agreements-in-the-crosshairs-antitrust-enforcement-takes-aim/
• New York AG, First American Financial settlement (October 2023): https://hselaw.com/news-and-information/legalcurrents/as-u-s-department-of-justice-suffers-setbacks-new-york-continues-crack-down-on-no-poach-agreements/

This article is general information, not legal advice. Laws vary by jurisdiction. Pactlio generates professional drafts for review — have a licensed attorney review anything important.