Christian Encarnacion-Strand presents an unusual problem for the Cincinnati Reds. His name is too long to fit horizontally across the back of his uniform. The Reds are taking an upside-down-horseshoe approach to this problem, and if this minor league third baseman makes the big league club this year, his 18-character surname (with hyphen) would win the award (there’s no award) for most characters in a major league surname.

The current honor lies with Simeon Woods Richardson, a pitcher for the Twins, whose unhyphenated surname stretches 16 characters (including the space). The Twins applied more of a 3/4 circle strategy, which I think is less visually appealing than the Reds’ approach.

When it comes to horizontal challenges, placing letters on a uniform falls in the category of very low risk. The twitter community may have strong opinions, but there’s no real implication to either approach.

But when it comes to horizontal relationships among companies competing for talent, it’s much more important to get things right. No poaching agreements can lead to criminal charges — as we can see from a case making its way through the federal district court in Connecticut.

In the pending case, Company A outsourced engineering projects to companies B through F, all of whom compete for engineering talent. Companies B through F also compete with each other for projects from Company A.

Between 2011 and 2019, Companies A through F allegedly agreed to restrict the hiring and recruiting of engineers and other skilled-labor employees between them. All of the companies allegedly agreed to (1) not hire employees of Companies B through F and (2) not proactively contact, interview, and recruit applicants who were employed by another one of the companies. Company A allegedly policed and enforced the agreement.

This arrangement led to a criminal indictment, charging that these no-poaching agreements were a conspiracy in restrain of trade, in violation of the Sherman Act. The indictment alleges that the companies engaged in illegal market allocation, which suppressed competition for talent and wages.

The defendants filed a motion to dismiss the indictment. Because this issue potentially affects staffing and franchise relationships, the American Staffing Association, the Society for Human Resource Management, and others filed amicus briefs in support of the motion to dismiss.

On December 2, 2022, the district court denied the motion to dismiss. The opinion evaluates the arguments on both sides and considers how this arrangement compares to others where no-poach agreements have been held to be permitted. For example, the court considered whether the agreed-upon restraint was “ancillary to a legitimate business collaboration.” If yes, that could support an exception to the legal prohibition on restraints of trade. But the court ruled that the relationship here was competitive, not collaborative, because Companies B through F were competing for outsourcing work from Company A.

From a procedural standpoint, this decision does not make any findings about whether the arrangement actually did violate the law. This ruling is just the denial of a motion to dismiss, which means the case can move forward.

But the opinion should provide a wake up call to the staffing industry, the franchise industry, and other organizations where a small identifiable number of companies are competing for talent and for engagements.

The federal government has made it a priority to minimize restraints of trade and has shown a willingness to issue criminal indictments against companies (and individuals) who enter into unlawful agreements that restrict labor mobility.

That is not to say that all no-poach agreements are unlawful. In many situations they are appropriate. But companies in horizontal competition with each other need to tread very carefully, and any no-poach agreement among horizontal competitors may create significant legal problems, including potential criminal liability.

For baseball uniforms, horizontal challenges can be addressed with the upside-down horseshoe or 3/4 circle strategy (preferably the former!). But these simple solutions are not available in the business world, where companies compete for talent and engagements. As of now, there is no upside-down horseshoe exception to the Sherman Act.

Amicus briefs were file

© 2022 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.