Naked Agreements Not to Poach Competitor’s Employees are Per Se Antitrust Violations
Client Alert
In some industries and professions, certain employers have complained that competitors are unfairly stealing their skilled blue collar and professional employees. These employers contend that it hurts business and raises costs when they spend time and effort training employees only to have those employees offered a job with a competitor. The competitor usually offers the employee higher compensation and the employee accepts the offer. To address this situation, competitors in certain industries have historically entered into what is known as a “no-poach agreement”. Under such agreements, each employer agrees that it will not solicit or hire employees currently working for the other employers.
In October 2016, the Antitrust Division of the Department of Justice (DOJ) issued Guidelines announcing its position that no-poach agreements among competitors that are not ancillary to a separate legal transaction or collaboration (so-called “naked” agreements) are illegal per se. Shortly thereafter, Principal Deputy Assistant Attorney General Andrew Finch made a speech specifying that the DOJ would prosecute no-poach agreement cases criminally under the antitrust laws. A violation of the criminal provisions of the antitrust laws is a felony, and an individual convicted of such a violation faces a mandatory jail sentence.
Recently, in a private class action case, In Re: Railway Industry Employee No-Poach Litigation, the defendants filed a Motion to Dismiss arguing that no-poach agreements are not per se antitrust violations but should be evaluated under the antitrust “rule of reason.” The DOJ is not a party to this litigation but filed a Statement of Interest reiterating its position that naked no-poach agreements not ancillary to a separate legitimate transaction or collaboration are per se antitrust violations.
For trade associations and professional societies, the DOJ’s Statement of Interest should serve as a reminder that no-poach agreements are high on the DOJ’s enforcement agenda. If members of the industry or profession represented by your association are engaging in practices that involve naked agreements among competitors not to solicit, recruit, hire without prior approval or otherwise compete for employees, you should consult with antitrust counsel immediately. For further information, please contact Steve Fellman (sfellman@gkglaw.com) or David Monroe (dmonroe@gkglaw.com).
