The Department of Justice (DOJ) is attacking no-poach hiring agreements, a trend that could have a lasting impact on how companies solicit/secure employees. This trend started in 2016, when they issued guidelines on how to avoid antitrust violations based on the illegal use of no-poach agreements.
The guidance noted that the DOJ could pursue criminal investigations, but the Department did not do so until recently. The guidance explained 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. . . . And if that investigation uncovers a naked wage-fixing or no-poaching agreement, the DOJ may, in the exercise of its prosecutorial discretion, bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies.”
The new DOJ guidance departs from the DOJ’s previous practice of only pursuing civil action, such as their first major no-poaching case, where the DOJ filed civil complaints against several Silicon Valley companies, including Lucasfilm, Pixar, Google, Apple, Adobe, and Intel. The case was settled in 2015 for $415 million.
Currently, the DOJ is pursuing charges against six executives and managers from Raytheon and other aerospace firms for “conspiring to restrain trade.” The DOJ alleges Raytheon and the co-conspirators attended meetings and engaged in discussions about restricting the hiring and recruitment of engineers and other skilled-labor employees. Prosecutors said in the indictment that the defendants recognized a mutual benefit of the conspiracy: preventing wages from increasing as they typically would in a competitive job market.
In addition to the DOJ’s actions, antitrust enforcement has increased on a state level. For example, in 2018, Washington state Attorney General Bob Ferguson reached a settlement with 100 fast-food chains after alleging the corporations had banned franchisees from hiring or recruiting the employees of other franchises.
So, what should management do? Management should be wary of entering into any agreements (written or not) regarding the terms of employment with firms that compete to hire the same employees. Instead, focus should be turned on how you can protect your company’s competitive edge using other tools—such as a non-disclosure or non-compete agreement with current employees and generally making your company the employer of choice.
Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at firstname.lastname@example.org or 203.454.0560