What to Make About the Justice Department's Most Recent 'No-Poach' Settlement
Management-side and antitrust lawyers are looking for enforcement clues about how the U.S. Justice Department will approach no-poach agreements between companies.
April 25, 2018 at 05:05 PM
4 minute read
Management-side lawyers and antitrust specialists are parsing a recent U.S. Justice Department settlement targeting a “no poach” deal that restricted employee recruitment between two companies, one new sign the Trump administration isn't shying from enforcement in this area.
The Justice Department in April settled a complaint against rail equipment suppliers Knorr-Bremse AG and Westinghouse Air Brake Technologies Corp. In the lawsuit, the government had alleged the companies unlawfully agreed for years not to compete for the other's employees.
The DOJ has warned since October 2016, in new guidance for human resources professionals, that companies and individuals could face criminal charges for no-poach agreements, but the government did not file any such charges in this case. Makan Delrahim, the department's antitrust chief, suggested in January that the first criminal charges were imminent.
No-poach agreements, common in many industries, can unlawfully eliminate competition, limiting the mobility of employees and their access to information. Employment attorneys say these agreements are often found in the tech industry.
Law firms and companies took notice of the Justice Department's settlement with Knorr-Bremse and Westinghouse, the first enforcement action under the Trump administration in this area of antitrust law.
Mark Krotoski, an antitrust partner at Morgan, Lewis & Bockius in Palo Alto, California, said he is helping a number of clients comply with the Justice Department's guidance on no-poach agreements. Enforcement actions should push companies to take a closer look at their policies and avoid any “back door” or official agreements between companies, Krotoski said.
The October 2016 announcement from the Justice Department about potential criminal exposure for no-poach agreements was “a significant development and it set the foundation for what we are seeing now,” Krotoski said. “This can happen in any industry—wherever there is a specialized skill with high demand.”
In the case against Knorr-Bremse AG and Westinghouse, the government said “the unlawful no-poach agreements challenged restrained competition for employees and deprived rail industry workers of important opportunities, information, and the ability to obtain better terms of employment.”
Mark Hamer, chairman of Baker McKenzie's North America antitrust practice, represented Knorr-Bremse. Craig Waldman, co-chairman of Jones Day's antitrust practice, represented Westinghouse. Neither could be reached for comment about the settlement, filed in April in U.S. District Court for the District of Columbia.
Although the allegations concern agreements between high-level corporate officials, employers should take steps to ensure all managers, recruiters and human resources professionals comply with antitrust laws, Daniel Green, an associate at Epstein Becker & Green in New York said in a recent blog post.
“For example, seemingly innocuous activities like discussing employee salary and benefits at industry conferences can constitute an unlawful information exchange,” Green wrote. “Employers will be well served to take additional steps to audit their business practices and communications with competitors throughout the organization in order to detect, and mitigate any legal risk associated with potentially unlawful agreements with competitors.”
Dionne Lomax, an antitrust attorney at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo said in a recent blog post that not all business arrangements involving employee solicitation and recruitment are unlawful.
Agreements reached in the context of a legitimate business transaction or collaboration could be viewed as necessary to achieve the purpose of the transaction, Lomax said. These exceptions include mergers or acquisitions, contracts with consultants and in the settlement of legal disputes.
“The DOJ is vigilant regarding its enforcement of no-poach agreements and will undoubtedly bring criminal charges to resolve similar conduct going forward,” Lomax wrote.
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