Antitrust Enforcement of No-Poaching Agreements is on the Rise
Going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements. These types of agreements eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers, which have traditionally been criminally investigated and prosecuted as hardcore cartel conduct. Accordingly, the DOJ will criminally investigate allegations that employers have agreed among themselves on employee compensation or not to solicit or hire each other’s employees.
This policy statement, issued by the Department of Justice and Federal Trade Commission in October 2016 as part of their antitrust guidance to human resource professionals, highlights the increasing risk employers face in entering into agreements to limit competition in the employment market.
Although the antitrust laws have historically encompassed agreements to limit competition in the employment market, up until fairly recently the federal antitrust enforcement agencies paid little attention to anti-poaching and non-solicitation agreements. And in the few instances where the Department of Justice or Federal Trade Commission challenged such agreements as anti-competitive, the enforcement actions were brought civilly and did not involve criminal prosecutions. These enforcement actions included a 2007 DOJ civil enforcement action brought against the Arizona Hospital & Healthcare Association challenging a uniform bill rate schedule for temporary and per diem nurses and a 1992 FTC civil enforcement action against Debes Corp. challenging agreements to boycott temporary nurses’ registries in order to eliminate competition among nursing homes for the purchase of nursing services.
The DOJ's and the FTC’s limited investigation and review of no-poaching and non-solicitation agreements began to change in 2010. In 2010, the Department of Justice brought three high-profile civil enforcement actions against Ebay and Intuit, Lucasfilm and Pixar, and Adobe, Apple, Google, Intel, Intuit and Pixar challenging agreements among the competitors not to cold call each other’s employees. Several years later, in October 2016, the DOJ and the FTC jointly issued a publication titled "Antitrust Guidance For Human Resource Professionals." The guidance reaffirmed application of the antitrust laws to no-poaching and non-solicitation agreements and announced a change in policy going forward to proceed criminally against “naked” agreements that are not part of a larger, efficiency-enhancing collaboration. The agencies also highlighted the risk to employers of exchanging confidential information about terms and conditions of employment, noting that while such information exchanges are not per se illegal and will not be challenged criminally, they may be subject to civil antitrust liability if they are determined to have, or are likely to have, an anticompetitive effect.
In a January 2018 speech, a high-ranking DOJ Antitrust Division official reaffirmed the DOJ’s intent to proceed criminally against “naked” no-poaching and non-solicitation agreements and indicated that the agency expects to initiate “multiple” no-poach enforcement actions in the coming months.
While “naked” no-poaching and non-solicitation agreements among competing employers are per se illegal and likely to give rise to criminal liability for both companies and individuals, no-poaching and non-solicitation agreements may be permissible if ancillary to a joint venture, business collaboration or settlement of litigation. To withstand scrutiny as part of a larger transaction, the restriction must be reasonably necessary for the underlying transaction and narrowly tailored both in scope and duration.
Taft's antitrust attorneys have extensive experience evaluating no-poaching and non-solicitation agreements and are available to assist clients in tailoring restrictions to minimize antitrust risk. Companies may also want to consider providing training to employees — human resources and otherwise — who are involved in employee recruitment and wage information exchange. Taft attorneys are available to assist with such training.
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