Agreements restricting the hiring of another party’s employees appear in commercial contracts, joint ventures and transactions. Their treatment differs sharply from employee-side covenants.

Naked no-poach agreements between competitors, not ancillary to a legitimate collaboration, are treated as market allocation and have been prosecuted criminally. Agreements among competing employers not to solicit each other’s employees, or to fix wages, fall here.

Ancillary restraints reasonably necessary to a legitimate transaction — a joint venture, an acquisition, a services engagement — are assessed under a rule of reason and are generally lawful if reasonably limited in scope and duration.

Drafting for defensibility. Tie the restriction to the transaction; limit it to employees who worked on the engagement or with whom the party had contact; limit duration to the term plus a modest period; and carve out general advertising and employees who approach unsolicited.

Employee-side non-solicitation of colleagues after departure is analyzed as a restrictive covenant and is more readily enforced than a non-compete, though several states now restrict it.

Practical caution. Verbal understandings between hiring managers at competitors carry the same exposure as written agreements, and are the fact pattern enforcement authorities describe.