The settlement is a strong and unique settlement that includes several provisions aimed at terminating each defendant`s non-wildach agreements and preventing future violations. It includes: (a) a wide-ranging injunction prohibiting any defendant from entering into or maintaining non-poaching agreements between themselves and with other employers that will be in effect for seven years; (b) a positive obligation to cooperate in the investigation of other potential agreements on the solicitation of non-solicitation agreements between the defendant and another employer; (c) the obligation of each defendant to inform its U.S. employees and recruiters, as well as the railway industry as a whole, of the settlement and its obligations; and (d) the new provisions of the Department`s Consent Order to improve the effectiveness of the Order and the Department`s future ability to enforce it. It added that the application of antitrust law in labour law can be complicated; Some employment agreements and information exchange are legal, while others violate antitrust laws. Managers may face difficult questions about hiring practices that violate the law if they are not properly informed. “A lot of companies, when I work on cartel training for them, see executives, managers and salespeople as beneficiaries of cartel training, but now they think, `Do I need to train HR professionals, business development and professionals involved in hiring?` ” said O`Brien. Non-poaching agreements are void if they are not reasonably necessary for separate and legitimate business cooperation between employers. Non-knock agreements and wage agreements are in themselves illegal because they eliminate competition in the same irremediable way as agreements to fix product prices or share customers. Companies are training HR practitioners on laws prohibiting poaching to ensure compliance, according to Ann O`Brien, a partner at BakerHostetler, who advises companies facing civil antitrust litigation. 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.” My colleagues and I have recently written extensively about the review of non-poaching behavior by state antitrust authorities (see, for example, here).
But let us not forget the additional scrutiny to which such agreements may be subjected in trade disputes. A recent Pennsylvania Supreme Court case considered for the first time in that state whether such provisions are enforceable under Pennsylvania law if they are ancillary to a service contract between two companies. See Pittsburgh Logistics Sys., Inc. v. Beemac Trucking, LLC., No. 31 WAP 2019, 2021 WL 1676399 (Pa. April 29, 2021). The government`s hostility to non-poaching agreements also extends to state law enforcement. In early 2018, the Washington State Attorney General announced an agreement with seven fast food chains (including Arby`s, Carl`s Jr., McDonald`s, and Jimmy John`s) that requires them to abandon or no longer apply non-solicitation clauses in existing franchise agreements and not to include such clauses in future contracts.
In July 2018, attorneys general of California, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York (whose law governs the ALS project), Oregon, Pennsylvania, Rhode Island and the District of Columbia announced an investigation into the non-poaching practices of other restaurant chains. The indictment shows the DOJ`s commitment to pursuing collusion in the U.S. labor market, according to Makan Delrahim, deputy attorney general of the DOJ`s antitrust division. “In collaboration with our law enforcement partners, the [DEPARTMENT of Justice] will ensure that companies that illegally deprive their employees of competitive opportunities are not immune to our antitrust laws.” The common guidelines of the US authorities can also serve as a guide for companies in Europe. Specifically, they stipulate: prison sentence for agreeing with a competitor not to recruit or hire its employees? It sounds like fiction, but according to the U.S. Department of Justice`s recent “Antitrust Guidelines for Human Resource Professionals,” such an outcome is a reality that HR professionals (and their companies) need to understand and navigate. Given the Justice Department`s recent review of “no poaching” and “no hiring” agreements between competitors under the Biden administration, many employers are wondering what legal steps they can take to protect their workforce from illegal raids by a competitor. The DOJ`s antitrust division opened its first major non-poaching case in 2010 when it filed civil lawsuits against several Silicon Valley companies — including Lucasfilm, Pixar, Google, Apple, Adobe and Intel — for asking hiring officials to enter into “no cold call” deals in which companies agreed not to contact each other`s employees and to notify each other. when they have made an offer to one of their employees. The settlements cost the defendant companies more than $400 million.
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. A no-poaching agreement involves an agreement with another company not to compete for each other`s employees, for example. B by not recruiting or hiring them. A collective agreement includes an agreement with another company on employees` wages or other conditions of remuneration, either at a certain level or in a region. “Private class actions and enforcement of the government`s law on the use of non-poaching agreements are on the rise, and this type of litigation is expected to increase over the next four years with the Biden administration`s priorities in the United States. Department of Justice,” Gerald Maatman, a partner in Seyfarth Shaw`s Chicago office, told XpertHR. “Employers should carefully review and implement such agreements with respect to compliance and process risks.” In these more recent cases, therapist staffing companies have agreed to reduce rates of pay for therapists and assistant therapists, ambulatory medical care centers have agreed not to recruit senior managers from others, and health staffing companies have agreed to divide school nurses among themselves and set their salaries. While these are extreme examples of anti-competitive practices by employers, our experience with competition authorities shows that enforcement starts with extreme cases and “easy wins” to shake things up a bit (losing their first cases to new legislation, because the regulator isn`t getting your message off on the right foot) before tackling less obvious offenses. None of these recent cartel cases involved the archetype of the “smoke-filled room,” where participants agreed on prices and joked that regulators hadn`t planted microphones in the room (which they had in the famous lysine feed additives cartel case in 1998), but that it does make good headlines and a Hollywood show – see The Informant! In 2009, which gave at least one of the last imprisoned executives the comfort of being played by Matt Damon – that`s not a necessary part of the crime. The exchange of information is sufficient to form an agreement.
The competition impact statement submitted at the same time as the complaint explains that these non-poaching agreements are in themselves considered illegal market-sharing agreements under Section 1 of the Sherman Act. In the labour markets at issue, the agreements eliminated competition in the same irremediable way as the agreements for fixing the prices of products or allocating customers, and they were not reasonably necessary for cooperation between undertakings. These non-poaching agreements have distorted competition to the detriment of workers by depriving them of the opportunity to negotiate better employment opportunities and employment conditions. The Department of Justice (DOJ) is targeting illegal hiring agreements without debauchery, a trend that employment experts say could have a lasting impact on how managers recruit employees. 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.” “They could make a deal that violates antitrust laws without having a full understanding of it if they`re not trained,” O`Brien said. What is a “no poaching” clause? A “no poaching” clause is a promise made by one or both parties to an agreement, in writing or verbally, during the term of the agreement, or for a period after the termination of the employees` employment, not to compete for the employees of the other party or of either party. .