A no-hire provision tucked into a customer, vendor, staffing, or franchise agreement may look like standard contract language.
It may be anything but standard.
Federal regulators and the New York Attorney General have repeatedly challenged agreements that restrict one business from recruiting or hiring another business’s employees. Recent enforcement actions show that employers shouldn’t assume these provisions are lawful simply because they appear in a commercial contract instead of an employee’s noncompete agreement.
The message for New York employers is straightforward: find these provisions before a regulator, employee, customer, or competitor does.
What’s a No-Hire Agreement
A no-hire agreement is an agreement between two businesses that restricts one or both companies from recruiting, soliciting, or hiring certain workers.
These agreements are sometimes called no-poach agreements. Depending on the contract, the restriction might:
- Prohibit a customer from hiring a vendor’s employee
- Prevent two businesses from recruiting each other’s workers
- Require permission before one company may hire another company’s employee
- Prohibit cold-calling or directly soliciting another company’s workers
- Impose a fee or penalty if a worker accepts employment with the other business
A traditional noncompete usually is between an employer and an employee. A no-hire agreement usually is between businesses. The legal issue is not just whether an employee agreed to limit her own employment options. It is whether two businesses agreed to reduce competition for workers.
Federal regulators focus on what the agreement actually does, not what the parties call it. Renaming a no-hire restriction a “non-solicitation” provision doesn’t make the antitrust issue disappear.
Why No-Hire Agreements Create Antitrust Risk
Federal antitrust law protects competition for workers just as it protects competition for products and services.
Businesses may compete for the same workers even if they don’t sell the same products or provide the same services. A supplier and its customer, for example, might both compete to hire employees with the same skills. A franchisor and its franchisees may compete for the same workers too.
The U.S. Department of Justice and Federal Trade Commission addressed these issues in their 2025 Antitrust Guidelines for Business Activities Affecting Workers. Those guidelines warn that businesses competing for workers may violate federal antitrust law if they agree not to recruit, solicit, or hire workers.
The guidelines are enforcement guidance. They don’t have the force of a statute and don’t decide whether a particular agreement is lawful. They do, however, tell businesses how the DOJ and FTC are likely to evaluate labor-market restrictions.
And the agencies aren’t being subtle about it.
Some No-Hire Agreements Can Create Criminal Exposure
Businesses that compete for workers may be committing an antitrust crime if they enter into an agreement not to recruit, solicit, or hire workers. Even when criminal charges aren’t pursued, the agreement may create civil exposure.
Here’s an important distinction: the DOJ brings federal criminal antitrust prosecutions. The FTC does not.
Where appropriate, the DOJ may bring felony charges against companies and individuals who participate in unlawful no-poach conspiracies. Executives and managers therefore shouldn’t assume this is simply a contract-enforceability problem for the company’s lawyers to sort out later.
The agreement also doesn’t need to be written. Federal regulators may consider formal contracts, emails, conversations, conduct, or other evidence of an understanding between businesses.
That means an informal promise between two business owners not to recruit each other’s employees may be just as concerning as a provision buried on page 17 of a service agreement.
A Partial Hiring Restriction Still Can Create a Problem
A business doesn’t need to prohibit hiring completely to create antitrust risk.
The federal guidelines explain that an agreement not to cold-call another company’s workers may qualify as a no-solicit agreement even if the companies remain free to hire workers who apply on their own. An agreement requiring one company to get permission before hiring another company’s employee also may qualify.
Employers therefore should look beyond provisions that use the words “no hire” or “no poach.”
The potentially problematic language may appear as:
- A prohibition on direct or indirect solicitation
- A prior-approval requirement
- A hiring penalty
- A conversion or placement fee
- A restriction on accepting applications
- A restriction covering former employees
- A promise not to “interfere” with another company’s workforce
Not every fee or restriction is necessarily unlawful. Context, purpose, scope, and competitive effect matter. But changing the label doesn’t change the substance.
Are All No-Hire Agreements Illegal?
No.
An agreement between competitors simply not to hire one another’s workers presents a much different risk from a limited restriction that is subordinate to a legitimate business collaboration and reasonably necessary to make that collaboration work.
The federal guidelines recognize that a fuller analysis may be appropriate when a restraint is collateral to a broader arrangement, such as a joint venture, and reasonably necessary to achieve the arrangement’s legitimate, pro-competitive purpose.
But that’s not a free pass.
A business relying on that argument should be able to explain:
- What legitimate collaboration the restriction supports
- Why some restriction is reasonably necessary
- Why a narrower provision wouldn’t adequately protect the business
- Why the restriction applies to the particular workers, time period, and conduct covered
“Everyone in our industry uses this clause” isn’t a legal justification.
The FTC Has Been Bringing No-Hire Enforcement Actions
The federal government’s position isn’t merely theoretical.
The FTC alleged that Guardian Service Industries included no-hire provisions in customer service agreements with residential building owners. The provisions prohibited building owners and competing contractors from hiring Guardian employees, including concierge personnel, custodians, and maintenance technicians.
In January 2025, the FTC finalized a consent order requiring Guardian to stop enforcing the provisions, void its existing no-hire agreements, and notify affected customers and employees.
The FTC also challenged no-hire provisions used by Planned Building Services and its affiliated companies. According to the FTC, Planned’s agreements limited building owners from hiring Planned employees and required a penalty if an owner hired one of those workers.
In February 2025, the FTC finalized an order requiring Planned to stop enforcing and including the provisions in its customer contracts and to notify customers and employees that the restrictions were no longer enforceable.
The FTC continued its enforcement activity in 2026.
The agency alleged that Adamas Amenity Services restricted building owners and management companies in New York City and New Jersey from directly or indirectly hiring Adamas employees without paying a significant penalty.
In February 2026, the FTC finalized a consent order requiring Adamas and its affiliated businesses to stop enforcing the agreements, notify customers and employees that the previous provisions were void, and comply with monitoring obligations for 10 years.
These matters were resolved through FTC consent orders, not fully litigated judicial decisions determining that every similar provision is unlawful. Still, they provide a clear picture of the types of agreements the FTC is willing to challenge.
The FTC’s Labor Task Force Still Is Relevant
In February 2025, the FTC created a Joint Labor Task Force involving its Bureau of Competition, Bureau of Consumer Protection, Bureau of Economics, and Office of Policy Planning.
The task force was directed to prioritize investigations and enforcement involving deceptive, unfair, or anticompetitive labor-market conduct. The FTC specifically identified no-poach, no-solicitation, no-hire, noncompete, and wage-fixing agreements as areas of concern.
That is another reason employers shouldn’t treat these clauses as forgotten language that nobody will notice.
What Happened to the FTC’s Nationwide Noncompete Rule?
The FTC’s attempted nationwide noncompete ban isn’t in effect.
A federal district court stopped the rule from being enforced. In September 2025, the FTC withdrew its appeals and accepted the vacatur of the rule.
But the loss of the nationwide rule didn’t eliminate federal enforcement involving restrictive employment practices.
The FTC has continued to bring individual cases under its existing statutory authority, while the DOJ and FTC continue to scrutinize agreements affecting labor-market competition. Employers shouldn’t confuse the demise of the broad noncompete rule with a federal retreat from no-hire enforcement.
It isn’t.
New York Is Taking Its Own Enforcement Position
New York doesn’t currently have a statute that expressly declares every no-hire agreement unlawful.
New York does, however, have a broad antitrust statute. General Business Law § 340, commonly known as the Donnelly Act, prohibits agreements that restrain competition or the free exercise of business, trade, commerce, or services in New York.
The New York Attorney General has relied on state and federal antitrust authority to investigate no-poach provisions.
In December 2024, the Attorney General announced a settlement requiring Guardian to end its no-poach agreements. In January 2025, the Attorney General announced a similar settlement with Planned Building Services. Both settlements involved building-service companies that had restricted customers from hiring workers assigned to their properties.
The Attorney General described the challenged provisions as illegal and anticompetitive. That makes the State’s enforcement position clear.
But there’s an important legal distinction. An Attorney General settlement isn’t the same thing as a binding appellate decision holding that every no-hire provision violates New York law. Whether a particular restriction is enforceable may still depend on the parties’ relationship, the purpose and scope of the provision, and its effect on competition.
New York Legislation Remains Pending
New York lawmakers have proposed the End Employer Collusion Act, but it hasn’t become law.
Despite the bill’s broad title and summary, its operative language is directed specifically at restrictions contained in franchise agreements. It would prohibit provisions restricting franchisees from soliciting or hiring employees or former employees of the franchisor or another franchisee.
As of July 26, 2026, Senate Bill S7437 is in the Senate Rules Committee. Its Assembly companion, A87, is in the Assembly Judiciary Committee.
Employers therefore shouldn’t describe the proposed legislation as a general statutory ban on every no-hire agreement between businesses. That isn’t what the current bill text says.
Employers Should Review More Than Employment Agreements
One of the biggest practical mistakes is looking only at agreements signed by employees.
No-hire provisions often appear in commercial contracts that HR may never see. Consequently, New York employers should review:
- Customer and client contracts
- Vendor and service agreements
- Staffing and placement agreements
- Franchise agreements
- Subcontractor agreements
- Joint-venture and collaboration agreements
- Merger and acquisition documents
- Consulting agreements
- Settlement and separation agreements
- Informal arrangements with competitors or industry partners
Pay particular attention to provisions that prohibit hiring, restrict recruiting, require advance permission, or impose a significant payment when an employee changes companies.
Some placement and conversion fees may serve legitimate purposes, particularly in the staffing industry. That doesn’t mean every fee is safe. A fee that’s excessive, indefinite, broadly applicable, or disconnected from actual recruiting or training costs deserves closer review.
Don’t Retaliate Against Someone Who Raises the Issue
The Criminal Antitrust Anti-Retaliation Act provides protections for employees, contractors, subcontractors, and agents who engage in certain protected reporting concerning conduct they reasonably believe violates federal criminal antitrust law.
Depending on the facts, those protections may apply when someone reports a suspected unlawful no-poach agreement.
An employer that responds to an antitrust concern by firing, threatening, demoting, or harassing the person who raised it may turn one legal problem into two.
What New York Employers Should Do Now
First, identify the contracts containing no-hire, no-poach, employee non-solicitation, hiring-fee, or prior-approval language.
Second, determine whether the provision restricts a business that competes with you for workers. Remember that businesses may compete in a labor market even when they don’t compete for customers.
Third, identify the legitimate business reason for the restriction. Be specific. Protecting confidential information or supporting a genuine joint venture is different from simply wanting to make it harder for employees to leave.
Fourth, consider whether a narrower provision would work. A tailored confidentiality agreement, trade-secret provision, customer non-solicitation clause, or reasonable staffing placement fee may address the actual concern without broadly restricting hiring.
Finally, don’t send a demand letter, threaten a customer, or collect a hiring penalty before having the provision reviewed. Enforcement itself can attract regulatory attention and create evidence that the company is actively restraining worker mobility.
The Bottom Line
A no-hire clause isn’t lawful simply because two sophisticated businesses signed it.
It isn’t lawful simply because it’s been sitting in the company’s standard agreement for years. And it doesn’t become lawful because someone changed the heading from “No Hire” to “Employee Non-Solicitation.”
Federal and New York authorities are actively examining agreements that limit competition for workers. Employers should know where those provisions are hiding, why they’re there, and whether they’re broader than they need to be.
The Coppola Firm helps New York employers review commercial contracts, employment agreements, restrictive covenants, and workplace compliance issues. Contact us before signing, renewing, or attempting to enforce a no-hire provision.
