A company’s employees are its most valuable asset. It is their skill, knowledge, and work that helps the company to achieve profitability. A skilled, experienced team is what often helps one company perform better within the industry than another. Within the labor market, an employee with exceptional skill and value to offer is seen as a core asset, and that person should be paid fairly for their services. That is where a non poaching agreement could come into play.
A non-poaching agreement aims to make it impossible for an employee who leaves a company to bring other employees with them to their new employer.
What Is Poach Severance?
Poach severance refers to compensation or severance pay provided to an employee in exchange for agreeing not to poach or solicit current employees after leaving a company. This type of severance package typically includes:
- A financial payment tied to the employee’s agreement
- Clear terms outlining prohibited recruitment activity
- A set duration during which the employee must comply
Poach severance is increasingly used when an employer wants additional protection against large scale employee departures, especially when a highly influential employee resigns. While valid, these provisions must be reasonable in scope and duration to be enforceable.
What Is a No Poaching or No Poach Agreement?
A no poaching agreement is an agreement between an employee and their employer in which the employee agrees not to encourage other employees to leave the company and go to another employer. This type of restriction must be written and signed by the employee for it to be binding.
Are No Poach Agreements Legal?
A non poaching agreement is a legal restrictive covenant that an employee may be asked to sign at the start or end of their employment. If the non poaching agreement is signed at the end of employment, it may be supported by a severance payment. If it is signed at the start of employment, it is supported by the employee’s starting work. Non poaching agreements are deemed to be valid if properly formed and supported by the necessary consideration because it is within an employer’s rights to protect their business and its manpower.
What Is the Competition Act in the United States, and How Does It Affect Non Poaching Agreements?
Are non poaching agreements legal? They may seem harmless to some employers, but to many employees, they can limit market growth and competition. They can also limit employees’ ability to push for better wages or working conditions. This Act precludes two employers from entering into such agreements because it would stifle competition in the market. However, this Act does not prevent an employer from asking an individual employee to sign a non poaching or non solicitation agreement.
Starting June 23, 2023, the Competition Act made it clear that unaffiliated employers that entered into any type of wage fixing or mutual no poaching agreement would be committing a criminal offense.
This falls under Section 45(1.1) of the Competition Act. Employers that engage in these actions could face serious penalties.
The Act covers all types of no poaching agreements between two or more employers that limit opportunities for employees of either company to be hired by the other. This includes:
- Limiting communication about job openings
- Adopting hiring methods that prevent competitor employees from being interviewed
- Restricting recruitment activities involving employees of other companies
As a New Jersey Employer, What Do I Need to Know About Non Poaching Agreements?
The use of a no poach agreement between employers is illegal, and as an employer in New Jersey, it is essential to understand the implications of such an agreement. New Jersey law limits restraints on trade but maintains restrictions that protect employees and their right to earn.
There are still enforceable limitations that can be used lawfully. For example, a non-solicitation clause can be included in an agreement to prevent a former employee from recruiting current employees to a competing business. These clauses help a business minimize the risk of losing key members of its workforce.
Knowing how a no poaching agreement affects your business is critical. Reach out to Hamilton Law Firm to learn how we can protect you.
Do You Need a No Poach Agreement Lawyer?
A no poach agreement lawyer can help employers and employees understand the limits and legality of these agreements under state and federal law. Legal counsel is essential when:
- Drafting or reviewing no poach or non solicitation clauses
- Negotiating severance packages that include poach severance
- Responding to an employee poaching lawsuit
- Determining whether an agreement is enforceable
- Ensuring compliance with the Competition Act
Because penalties for unlawful no-poach agreements between employers are severe, New Jersey companies should consult a dedicated employment lawyer before using or signing any employee restriction.
How No Poach Agreements Affect the Modern Workforce
Research shows that in 2024 and 2025, employee mobility is one of the biggest influences on business growth and competition across industries. With the median age of the U.S. workforce now approaching 41 years, companies are increasingly competing for experienced workers with specialized knowledge. Restrictions that limit employees’ ability to move freely between employers can reduce wage growth and make it harder for workers to negotiate better conditions.
At the same time, employers face legitimate risks when high value employees leave and attempt to recruit others from within the organization. This is where properly drafted non solicitation clauses and poach severance agreements offer a lawful compromise. They reinforce business stability while respecting the Competition Act’s ban on employers to employ no poaching practices.
By understanding the distinction between illegal no poach agreements and legal employee specific restrictions, New Jersey employers can protect their interests without violating federal competition law.
Hamilton Law is Here to Help
No poach agreements remain a complex area of employment law. While agreements between employers to restrict hiring are illegal, employers may still use individual non-solicitation agreements and poach severance arrangements to protect themselves from significant workforce loss. The key is ensuring that any agreement is properly drafted, lawful, and supported by valid consideration.
If your business needs guidance with drafting these agreements or defending against an employee poaching lawsuit, contact Hamilton Law Firm for experienced and trusted legal support.