The Justice Department launched its first civil enforcement action in 2018 against two of the world`s largest suppliers of railway equipment, competing with each other « to attract, hire and retain a variety of skilled employees. » The complaint alleged that the companies had entered into an illegal agreement between themselves and later with a third railway supplier for poaching. In the settlement agreement, the Department of Justice clarified that it considered non-poaching agreements to be inherent violations of antitrust law, even if there was no actual anti-competitive harm. Gaglio said illegal no-poaching deals are common in many industries where employees may mistakenly view such an agreement as polite or respectful of competitors and business partners. However, low- and middle-level executives have been the subject of action by the Ministry of Justice, which, according to Gaglio, shows the importance of ensuring that managers are aware of developments in competition law. In 2016, the DOJ and the Federal Trade Commission (FTC) issued guidelines for human resources professionals on how to avoid potential antitrust violations related to the use of non-poaching agreements. A criminal violation of the Sherman Act can result in a $100 million fine for a company, and the fine can be increased to double the profit from the crime or double the loss of victims if one of the amounts is higher than the legal maximum. Antitrust civil cases do not have their own consequences. A 2011 class action lawsuit against seven of the world`s largest tech companies, including Apple, Google and Intel, alleged a conspiracy to suppress employee compensation through « no-poaching » agreements. In 2015, this case was reportedly resolved for settlements totalling $435 million. The guidelines stated that the DOJ could conduct criminal investigations, but the ministry has only recently done so.
The Department of Justice will « criminally investigate allegations that employers have agreed on workers` compensation or that they will not recruit or hire each other`s employees, » according to the guidelines. « And if this investigation reveals a bare wage-fixing or non-solicitation agreement, the Department of Justice may, in the exercise of its prosecutorial discretion, lay criminal charges against the guilty participants in the agreement, including individuals and businesses. » In the PLS appeal, Pennsylvania`s highest court came to a less complete conclusion. Namely, if a non-poaching agreement is not « naked » and in itself illegal, but rather ancillary to the main purpose of a contract (in this case, a « shipping contract »), its applicability depends on its relevance. As part of the « relevance » test – the Court notes that this is consistent with the Department of Justice`s approach to federal antitrust enforcement – the Court considers both the interests intended to be protected by the provision, on the one hand, and the harm that the provision could cause to the public, on the other hand, in order to determine whether the provision is enforceable. If your business leaders feel a strong need to implement a non-compete clause to protect valuable information, make sure your state law would allow or enforce it. A second count of the indictment alleges that SCA and a « Company B » were also involved in similar illegal activities. For example, the indictment states that an SCA hiring manager sent an email to a recruiter that Company A and Company B are « taboo to SCA. » The non-poaching agreement is explained as follows: « […] We can hire junior staff (below the director), but our agreement is that we would only talk to senior managers if they have already told their boss that they want to leave and are looking for it. An email from an SCA human resources manager to a candidate is quoted stating that SCA cannot recruit to Company B « unless candidates have received explicit permission from their employers that they may be considered for employment with us. » If future or current employees sign a non-compete clause, they should always be offered compensation for agreeing to the terms. Indeed, by adhering to this type of clause, the employee effectively limits his ability to earn a living in his field of expertise. The applicability of this provision came to a head after Beemac allegedly hired several PLS employees and PLS sought an injunction. Although the trial court rejected the injunction, it issued a full judgment suggesting that all non-poaching agreements « are void against public order because, in some cases, they essentially impose a non-compete obligation on employees of companies without their consent or even without their knowledge. » The Justice Department said it had not laid any criminal charges in the previous civil case because the agency discovered the non-poaching agreements — and the companies terminated them — before the October 2016 guidelines were issued. But the agency had also pointed out — and shown with the SCA`s indictments — that deals reached or discovered after the publication of the October guidelines are more likely to be prosecuted.
The U.S. Department of Justice (DOJ) has filed criminal charges against a company for the first time for enforcing an employee no-poaching agreement. A federal grand jury has returned a two-count indictment accusing Surgical Care Affiliates LLC (SCA) of agreeing with its competitors not to debauch senior executives from each other. SCA owns and operates outpatient medical care centers across the country. In October 2016, the ministry announced that from then on, it intended to continue the no-poaching and bare wage agreements. Since the announcement in October 2016, the Cartel Division has continued to reinforce this message. For example, Andrew Finch said in a speech in January 2018 that « the department expects to lay criminal charges » for agreements that began after October 2016, as well as for agreements that began before that date but continued after that date. At the discretion of the Public Prosecutor`s Office, the Cartel Division will prosecute as civil violations the non-poaching agreements concluded and terminated prior to these announcements. President Joe Biden recently issued an order encouraging the FTC to ban or restrict non-compete obligations.
The FTC has yet to adopt new rules in response, but employers need to be prepared for possible changes. While non-compete obligations may make employers more comfortable, they ultimately impact workers` ability to earn a living, which would play a role in any legal assessment of either of these agreements. If your company doesn`t have a valid and provable reason to implement an SCC and your state would allow the application of this issue, you`d probably better stay away from them altogether. .
