Second Circuit: No-Hire Agreements Under Scrutiny
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APPLIES TO All Employers with Employees in CT, NY, and VT |
EFFECTIVE March 13, 2025 |
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Quick Look
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Discussion:
In Giordano v. Saks & Co. LLC, the Second Circuit Court of Appeals dismissed a class action lawsuit brought by luxury retail employees alleging an unfair restraint on competition caused by the defendant luxury brands entering into no-hire agreements. The court ruled the plaintiffs had not plausibly alleged harm to the luxury retail employees due to the no-hire agreements. Here, several former Saks Fifth Avenue employees alleged the retailer conspired with luxury brands to control the wages and certain job conditions of their employees. Specifically, the plaintiff employees claimed the American subsidiaries of Louis Vuitton, Fendi, Loro Piana, Gucci, Prada, and Brunello Cucinelli entered into a no-poaching agreement with Saks not to hire any Saks luxury retail employees without Saks’ approval or before the passing of six months after the separation of the employee from Saks.
The plaintiffs alleged the no-poaching agreements violated Section 1 of the Sherman Act. The Sherman Act is primarily an antitrust law and prohibits agreements or conspiracies that unreasonably restrain trade. The plaintiffs argued the no-poaching agreements unreasonably restrained trade by suppressing wages and limiting the professional mobility of luxury retail employees in an alleged nationwide market.
The court upheld the United States District Court for the Eastern District of New York’s dismissal of the case. The court agreed with the district court that the plaintiffs failed to state an antitrust claim. Since the no-hire agreements were primarily vertical, between a retailer and brands that supply merchandise, and not horizonal restraints, the claims must be analyzed under the rule of reason. The plaintiffs were unable to demonstrate that alleged anticompetitive conduct has an adverse effect on competition in the relevant market. The court found that the employees were also unable to show that the no-hire agreements depressed wages and limited worker mobility in either the nationwide market of luxury retail employees or all Saks employees.
Although this case was dismissed, employers should review any proposed restraints on employees and their mobility in the labor market with legal counsel.
Action Items
- Consult with legal counsel prior to entering into no-hire agreements with suppliers or competitors.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase