No-Poach Agreements
No-poach agreements between competitors in a market are designed to limit employee options, and ultimately result in reduced employee compensation. When two or more competitors implicitly or expressly agree to stop competing with one another, they are creating a “no-poach agreement”, also called “anti-poaching” or “non-poaching”.
The Department of Justice (DOJ) and state Attorneys General have become more active in finding and enforcing action against companies who illegally agree to not poach employees from each other, their competitors in the labor market. The DOJ published “Antitrust Guidance for Human Resource Professionals” in 2016, to assist professionals tasked with hiring from creating new illegal agreements to constrain labor movement. States including California, Illinois, Maryland, Minnesota, New Jersey, New York and Oregon are investigating other horizontal no-poach agreements such as those in the fast-food industry.
Companies who violate the law face severe consequences. The DOJ can bring federal criminal prosecution against executives, antitrust agencies are equipped to bring civil enforcement actions, state Attorneys General can prosecute this at the state level, and workers themselves can sue their employers and other companies with whom they have formed a no-poach agreement. Workers from Apple, Google, McDonalds, and more have sued companies for no-poach agreements, winning large settlements against.
If you wish to speak with antitrust lawyers about a potential no-poach lawsuit, contact Schneider Wallace. Call us today at 1-800-689-0024 to speak with our experienced employment attorneys.
No-Poaching Meaning
A no-poaching agreement is when two or more companies come to an agreement, which can be explicit or implied, can be written down or discussed verbally, for the two or more competitors to limit hiring of each others employees. The agreement is to not “poach” employees of the other firm, in exchange for the same not happening to their employees. These agreements are usually deemed anticompetitive and illegal.
The DOJ lists examples of no-poach agreements to avoid, stating that an individual is likely breaking antitrust laws if they:
- “agree with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range (so-called wage-fixing agreements), or
- agrees with individual(s) at another company to refuse to solicit or hire that other company’s employees (so-called “no-poaching” agreements).”
These agreements can form in various ways. When Apple and Google illegally conspired to form a no-poach agreement, they agreed to not cold call employees of the other company. Apple agreed to not have their hiring professionals call Google employees to try and reach out about open positions, and Google agreed to do the same and not call Apple employees. Each company placed the other company on a “do not call” list. Executives of each company worked together to form the agreement.
While executives negotiating and forming the agreement in this case is an explicit example, implicit agreements can be illegal as well. An implicit agreement is one in which the goal is not expressly stated or written down, but the actors understand through assumption or implications from other statements or actions. An example of proof of an implicit agreement is when companies engage in parallel action, such as lowering offers equally or limiting offered compensation equally to new hires.
No-poach agreements also include cases where a third party is used to form the agreement. It does not matter to agencies such as the Department of Justice if the agreement was done through an intermediary, if there is in effect a no-poach agreement or coordination in hiring practices between two companies as a result. This could include implicit agreements set through an intermediary.
If you are an employee of a company, and your employment options are constrained by the actions of your employer in agreement (implicit or explicit), you have been harmed by their action. The attorneys at Schneider Wallace can offer a free consultation to review your employers activities and your potential claim.
Are No-Poaching or Anti-Poaching Agreements Legal
These agreements are usually deemed anticompetitive and illegal. Exceptions exist for limited examples of no-poach agreements, such as the employees of two firms working on a specific joint venture together, but they are limited in scope to both time limits and the type of work or workers that can be included.
The DOJ states that wage-fixing and no-poaching agreements are “per se illegal under antitrust laws”. Per se illegal activity is activity that does not need to be investigated for the scale of harm, it can simply be viewed as illegal if it took place. An employee does not need to establish the activity is unreasonable, or it has specific negative consequences for the employees compensation or career. Examples of per se illegal antitrust activity:
- Horizontal agreements to fix prices.
- Horizontal market allocation agreements, typically on the customer side but can include employee side allocation agreements (no-poach).
- Bid rigging agreements.
Each of these actions, typically in antitrust done to conspire against their customers, has a mirrored version in the employment market:
- Agreements to coordinate wages offered between companies, to limit movement to receive a raise by employees, effectively a fixed price for labor.
- Horizontal no-poach agreements, effectively a “market allocation” for employees instead of customers.
- Agreements to offer similar employment salary and total compensation, bid rigging between two companies for new hires.
No-Poach Agreements Antitrust
The Department of Justice’s offers guidance to employers regarding how to avoid antitrust violations. The DOJ recommends employers never share sensitive information with competitors, such as salary offers. Even without an explicit agreement between two competitors to freeze and lock wages, sharing salary information and compensation offers can result in coordinated pay changes. These types of information releases can form evidence for an employee in a lawsuit against their employer, as proof of implicit illegal agreements to fix wages.
In the case of the Department of Justice vs the Utah Society for Healthcare Human Resources Administration, the DOJ accused the Utah Society of sharing non-public information about the wages of nurses. The results of the information sharing was coordinate changes to wages and wage offers for nurses in Salt Lake County and Utah. This artificial lowering of nurse wages through information sharing was deemed illegal by the DOJ. The end result was a settlement with the DOJ to stop the practice, and barred the Utah Society from sharing both current compensation, historic compensation, or prospective compensation and pay offers.
Non-Poach Agreements By State
The DOJ is not the only government agency that can investigate antitrust activity including non poach agreements. Each state has their own set of laws including employment and antitrust laws, the attorney general of each state is empowered to investigate illegal activity.
Employers also face state action by lawyers on behalf of injured employees, seeking compensation for wage loss and other damages if they have engaged in unlawful behavior.
No-Poach Agreements Lawsuits
If you know of a no-poach agreement that has affected employees, please contact an experienced antitrust attorney to review your claim. Schedule a free consultation with our knowledgeable employment litigation lawyers at Schneider Wallace.