Justice Department Targets Companies That Use Nonpoaching Agreements

Official says employers should expect criminal enforcement this year

Roy Maurer By Roy Maurer January 26, 2018
Justice Department Targets Companies That Use Nonpoaching Agreements

​The Department of Justice (DOJ) is planning criminal enforcement actions against employers that agree not to compete for workers, a top official announced.

Makan Delrahim, the assistant attorney general for the department's antitrust division, said that his team has been reviewing potential violations of the antitrust law prohibiting nonpoaching agreements and that added enforcement actions will be taken this year. Delrahim was speaking to attendees of a conference sponsored by the Antitrust Research Foundation on Jan. 19, according to Bloomberg Law.

Delrahim said that even after his office and the Federal Trade Commission (FTC) issued an antitrust guidance for HR professionals in October 2016—affirming that it is against the law for employers to agree to fix wages or to not hire one another's workers—employers have continued to violate the law. They risk severe sanctions, including criminal prosecution.

"In the coming couple of months, you will see some announcements, and, to be honest with you, I've been shocked about how many of these there are, but they're real," he said.

"While no criminal charges have yet been brought against employers for entering no-poach or wage-fixing agreements, that is about to change," said Dee Bansal, an attorney in the Washington, D.C., office of law firm Cooley LLP. "The Trump administration has voiced support of this Obama-era policy."

Delrahim clarified that the DOJ might bring civil complaints against the parties in a nonpoaching agreement for conduct before the 2016 guidance was issued but will "treat conduct as criminal" if it continued after the DOJ's policy announcement.

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"Workers are entitled to the benefit of competition for their services, and firms should avoid reaching agreements with competing employers that would fix wages or other terms of employment, or prevent them from competing for workers," the FTC said in the guidance. "HR professionals often are in the best position to ensure that their companies' hiring practices comply with the antitrust laws. In particular, HR professionals can implement safeguards to prevent inappropriate discussions or agreements with other firms."

The DOJ can bring a criminal prosecution against individuals, the company or both, depending on the facts of the case. The guidance states that an individual likely is breaking the law if he or she reaches an agreement with someone at another company about:

  • Limiting employee compensation, benefits or other terms of employment, either at a specific level or within a range.
  • Refusing to solicit or hire the other company's employees.

Even discussions—without an oral or written agreement—to limit employee compensation or recruiting may lead to an investigation.

In October 2016, Phillip Warren, a partner in the San Francisco office of Covington & Burling, said the guidance was a major shift in policy. "This change makes it important for companies to promptly audit their human resources policies and practices to identify any potentially illegal conduct and to take quick action. Early discovery of potential problems will put companies in the best position to formulate an optimal strategy―to mitigate risk or even avoid criminal exposure altogether," he said.

The FTC guidance outlined additional actions to guard against, including:

  • Exchanging, giving or receiving company-specific information about employee compensation or terms of employment with another company.
  • Participating in a meeting, such as a trade association meeting, where wage-fixing or nonpoaching is discussed.
  • Discussing these topics with colleagues at other companies, including during social events.

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