US Department of Justice Continues its Pursuit of Naked No Hire or Poach Agreements - American Society of Employers - Michael Burns

US Department of Justice Continues its Pursuit of Naked No Hire or Poach Agreements

“Naked” no poach agreements – what are they? Naked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third-party, are illegal under the antitrust laws. That means that if the agreement is separate from or not reasonably necessary to a larger legitimate collaboration between the employers, the agreement is deemed illegal without any inquiry into its competitive effect.

The US Department of Justice (DOJ) and the Federal Trade Commission (FTC) is continuing to clampdown on employer agreements not to recruit or not to compete on employee hires. In October of 2016 the DOJ and FTC jointly issued it Antitrust Guidance for Human Resource Professionals that announced the Agencies would pursue criminal prosecutions if they found employers making these agreements with one another, “nakedly”.

This enforcement position was amplified last year by Administrators at the DOJ and most recently by Assistant Attorney General Makan Delrahim January 19, 2018. Mr. Delrahim said the department has been “very active” in reviewing this issue and has found that the use of such agreements are more widespread than the DOJ had believed.

A naked no poach agreement is an agreement not to solicit each other’s employees that stands alone. A “naked” agreement “stands alone” and is “not ancillary to a larger, legitimate collaboration.” A “naked no hire” agreement prohibits the hiring of the other party to the agreement even if the employee was not solicited away from the other employer. This is a slight difference from the no poach agreement.

So when are such agreements legal? The Courts have found agreements not to solicit employees legal when two employers do it to further the interests of a legitimate collaboration. A legitimate collaboration was found when AT&T Corporation sold one of its units to Texas Pacific Group and AT&T agreed for a period of eight months not to hire away the employees of that sold unit. The 3rd Circuit Court of Appeals found that the agreement could stand as legal because it was “legitimate ancillary restraint and that its purpose was to ensure that the purchaser could retain the skilled services” of the previous owner’s employees.

One of the most famous cases of this type of joint employer collusion that was found illegal was lead by Steve Jobs’ Apple Corporation and involved Adobe, Google, Intel Lucasfilms, and Pixar all agreeing not to hire each other’s highly skilled technology development and other employees. This case was eventually settled by the parties for $435 million dollars. As stated above, going forward the DOJ will include criminal prosecution in addition to the civil suit liability.

As labor markets for skilled employees get even tighter, employers have to be aware that antitrust laws apply to the employment marketplace. Therefore, employers and their human resource professionals should make sure they have not entered into any agreement (formally or informally) not to hire one another’s employees. This type of illegal agreement also extends to wage fixing by way of sharing data directly with one another and agreeing to keep wages at a set level.

Employers may participate in wage and salary surveys that aggregates the job wage data among a large enough sample of wage data. The survey must comply with DOJ guidelines. The American Society of Employers adheres to those guidelines in the production of its wage and salary surveys, as well as special cuts from those larger surveys.

Employers should also consider development of an Antitrust Compliance policy.

Source: Seyfarth Shaw Client Alert DOJ To Announce Criminal Enforcement Actions For “No-Poach” Agreements 01/25/2018. Authors: Timothy F. Haley and Ashley K. Laken
Please login or register to post comments.

Filter:

Filter by Authors

Position your organization to THRIVE.

Become a Member Today