No-poaching Agreements: Do Not Pass Go, Do Not Collect $200, Go Directly to Jail

Perhaps not directly to jail, but the U.S. Department of Justice has come out aggressively warning talent acquisition and human resources professionals about the risk of criminal prosecution arising from what the government considers to be non-poach agreements, where competitors agree not to hire employees from the other or otherwise collaborate to establish or restrict wages and benefits. The DOJ’s position is that these types of agreements violate antitrust laws by restricting competition for employees and depressing wages and benefits that employees might otherwise obtain in a competitive marketplace.

Looking back at the history of antitrust laws, in 2010, the DOJ commenced and settled anti-trust actions against Adobe, Apple, Google, Pixar, Intel, and Intuit arising from the employers’ agreements not to recruit each other’s employees which eliminated competition and depressed compensation to the employees. The judgment enjoined the parties from entering into further agreements or restraining efforts to recruit or solicit the employees of competitors for five years. In 2013, a class-action civil case was filed against, essentially the same defendants, alleging violations of California’s antitrust statute, and right to compete law. By 2015, the Court approved over $400 million in settlements for the certified class of 65,000 employees.

In October 2016, the DOJ and the Federal Trade Commission published “Antitrust Guidance for Human Resource Professionals” advising employers and human resource professionals against entering into formal or informal “non-poach” agreements, and giving notice that future matters may be subject to civil and criminal prosecution. Employers and professionals could receive substantial fines and jail time. Corporations found guilty of criminal violations of antitrust laws could be liable for fines up to $100 million and individuals may be liable for fines up to $1 million and could also be sentenced up to 10 years in prison.

If a company or executive alerts the DOJ about any anticompetitive conduct, the “amnesty” program may protect them from criminal prosecution, including fines and jail time. So, the Antitrust Guidance recommends that interested parties with information about antitrust violations report potential violations to the DOJ relating to “agreements among competitors to fix wages, salaries, benefits … not to compete for employees in hiring decisions” and provides email, phone, and mail address to facilitate the reporting. However, participation in the program doesn’t protect against civil litigation.

Recently, the DOJ announced its lawsuit and settlement of the most recent of the anti-poaching line of matters. USA v. Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation, Case No. 1:18-cv-00747. The stipulated judgment in Knorr-Bremse will enjoin the employers from enforcing or entering into no-poach agreements, and will require subsequent compliance measures and cooperation with any subsequent investigation or litigation without any financial component. However, the settlement is not a bar to any private lawsuits that affected employees might bring. Moreover, the Justice Department advised that no criminal prosecution arose from Knorr-Bremse, in part, due to the age of the no-poach agreements that had ceased by 2016.

The DOJ’s increased focus, and new civil and criminal litigation, make it imperative that talent acquisition and human resource professionals and their employers comply with antitrust laws. This focus, as well as the free discovery that the government investigations and litigation uncover will, no doubt, attract plaintiff-side class action lawyers to increase civil prosecutions seeking monetary damages in the seven to nine-digit range.

What to Do

Start by reading the “Antitrust Guidance for Human Resource Professionals.” This 11-page pamphlet is fairly user friendly and contains both descriptive content and a Q&A format designed to provide potential “real life” scenarios.

Keep a vigilant eye on suggestions from employers that the DOJ might consider to be anti-competitive practices. The prior prosecutions reached antitrust findings based on emails, verbal conversations, and inferences, not necessarily formal agreements.

Be aware of:

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  • discussions or agreements limiting compensation and/or benefits to that of a competitor;
  • refusing to solicit or hire another company’s employees;
  • agreements with other employers about compensation, terms of employment and/or benefits;
  • exchanging compensation, benefit, employment or recruitment strategies with competitors; and
  • agreements to not compete aggressively for competitors’ employees.

Action measures to ensure compliance:

  • provide compliance training to talent acquisition, human resources personnel, recruiters, and executives;
  • develop a written policy against non-poach agreements; and
  • consult legal counsel if issues are spotted and to conduct an antitrust audit.

Talent acquisition and human resources professionals are in a position to encounter suggestions, conversations, or direction that arises internally — as part of an industry meeting, conference, or conversation with a representative of a competitor, and if that happens to you, you should promptly seek out counsel or in-house counsel for protection from any concern that the conduct might violate antitrust law.

Dan Forman

Dan M. Forman is managing partner in the Los Angeles Office of Carothers DiSante & Freudenberger LLP, an award-winning California employment, labor, and business immigration law firm providing litigation defense and counseling to California employers. Forman is a renowned expert in the expanding field of trade secret litigation and currently is Chair of CDF’s Unfair Competition and Trade Secret Practice Group. He has nearly 30 years of experience representing clients before a wide range of state and federal courts, as well as regulatory agencies such as the California’s Labor Commissioner, the Department of Fair Employment and Housing, the Employment Development Department, the Equal Employment Opportunity and similar agencies. To contact Forman, email him at dforman@cdflaborlaw.com or call (213) 612-6300.