A series of recent statements highlight the continuing enforcement by the US Department of Justice to focus on "no-poaching" and wage-fixing agreements with more enforcement actions expected to be announced in the near future.
The Antitrust Division at the US Department of Justice (DOJ) publicly acknowledged once again last week that active criminal investigations involving "no-poaching" agreements are underway. The most recent statement clarifies that a number of these criminal investigations are targeting companies in the healthcare industry.
In general, DOJ and the Federal Trade Commission (FTC) have described "no-poaching" agreements as agreements "with individual(s) at another company to refuse to solicit or hire that other company's employees." In addition, DOJ and the FTC are scrutinizing wage-fixing agreements, described as agreements "with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range."1
At an Antitrust in Healthcare Conference on May 17, Deputy Assistant Attorney General Bernard (Barry) A. Nigro noted that the Antitrust Division plans to bring criminal cases to redress antitrust violations in the healthcare industry for no-poaching agreements. As he explained:
Combatting rising healthcare prices has been, and under the new Administration will continue to be, a priority for the Division. We are investigating other potential criminal antitrust violations in this [health care] industry, including market allocation agreements among healthcare providers and no-poach agreements restricting competition for employees. We believe it is important that we use our criminal enforcement authority to police these markets, and to promote competition for all Americans seeking the benefits of a competitive healthcare marketplace.2
Mr. Nigro's speech was the latest in a series by Antitrust Division leaders highlighting pending criminal investigations involving no-poaching agreements. We have been actively monitoring and reporting on these developments in a series of LawFlashes and assisting clients as these antitrust issues arise.3
The recent DOJ speeches and April civil enforcement action involving three rail equipment suppliers highlight four key issues for healthcare and other companies to consider:
- DOJ Views
"No-Poaching" Agreements as a "Prevalent" Issue
Affecting Many Industries: From DOJ's
perspective, the number of no-poaching agreements is
"prevalent." Mr. Nigro noted last week that "it is
'shocking' how prevalent agreements have become between
companies not to solicit or hire each others' employees,"
and that he is "really surprised at how prevalent the practice
is."4 Last September, he noted that
"the fact that we have so many investigations in this area
highlights how seriously the division takes these sorts of
allegations."5
In January 2018, when Antitrust Division Assistant Attorney General Makan Delrahim confirmed that the Antitrust Division will soon announce criminal prosecutions for no-poaching agreements, as we reported in a Law Flash, he also was "shocked about how many of these [no-poaching agreements] there are."6 Also, in January, Principal Deputy Assistant Attorney General Andrew C. Finch underscored that "the Division expects to initiate multiple no-poach enforcement actions in the coming months."7
Given these DOJ views, companies should look closely at what, if any, exposure they may have for no-poach and wage-fixing agreements. - Criminal Focus on
Post-October 2016 Conduct: DOJ has made clear a
number of times that post-October 2016 conduct involving naked
no-poaching or wage-fixing agreements will be considered for
criminal prosecution. The line that the DOJ is drawing is based on
the date of its announcement for the first time that it would
"proceed criminally against naked wage-fixing or no-poaching
agreements."8
Assistant Attorney General Delrahim confirmed in January that criminal prosecutions will be based on conduct that continues or occurs after the policy was announced in October 2016.9 Other senior officials have made similar warnings, including Principal Deputy Assistant Attorney General Andrew C. Finch.10
In the first civil enforcement action after the policy announcement, DOJ made clear that since the conduct preceded October 2016, a civil enforcement action was brought instead of criminal charges.11 For more on this first civil enforcement action, see our prior LawFlash.
If companies identify potential criminal conduct, they may wish to consider the Antitrust Division Leniency Program, which allows the first company or individual which self-reports criminal conduct, cooperates with the investigation, and satisfies other conditions, to avoid any criminal penalties. - Per Se Unlawful
Standard: DOJ considers no-poaching and wage-fixing
agreements as per se illegal, meaning that companies
cannot escape liability by seeking to explain or justify such
agreements.
In the recent civil enforcement action, the DOJ also treated the no-poaching agreements as "per se unlawful horizontal market allocation agreements under Section 1 of the Sherman Act."12 In other words, "the agreement is deemed illegal without any inquiry into its competitive effects."13 - International
Issues: Companies conducting business in other
countries should be aware of international enforcement
issues.
The recent civil enforcement action involved no poaching conduct at three separate entities, including a privately owned company with its headquarters in Germany and wholly-owned subsidiaries in the United States, a US-based company with over 100 subsidiaries, and a rail equipment supplier based in France before it was acquired by the US company in November 2016.
As we previously noted, other enforcers are also focusing on the enforcement of antitrust laws on HR decisions. For example, on April 9, the Hong Kong Competition Commission issued new guidance.14 For more on the international issues, see our prior LawFlash.
We will continue to monitor DOJ and FTC developments in applying the antitrust laws to human-resource decisions. In the meantime, please advise if you have questions or need assistance with review of issues and facts concerning antitrust issues involving HR decisions; compliance training to HR personnel and other executives; review, modification, or mitigation of no-poaching terms; or consideration of mitigation steps such as the Antitrust Division's Leniency Program.
Footnotes
1 US Dep't of Justice, Antitrust Div. & Fed. Trade Comm., Antitrust Guidance For Human Resource Professionals (Oct. 2016) (Antitrust HR Guidance); see also Press Release, Antitrust Division, US Dep't of Justice, Justice Department and Federal Trade Commission Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation (Oct. 20, 2016).
2 Barry Nigro, Deputy Assistant Att'y Gen., Antitrust Div., US Dep't of Justice, A Prescription for Competition, Keynote Remarks at the American Bar Association's Antitrust in Healthcare Conference (May 17, 2018) (emphasis added).
3 See Morgan Lewis, LawFlash: DOJ's First Enforcement Action for 'No-Poaching' Agreements Since the Landmark Antitrust Guidance for HR Professionals (Apr. 12, 2018); Morgan Lewis, LawFlash: DOJ Antitrust Division Announces Imminent Criminal Prosecution for 'No Poaching' Agreements (Feb. 6, 2018); see also Morgan Lewis, LawFlash: Are Your Employment Practices in Breach of Antitrust Law? (Mar. 30, 2018); Morgan Lewis, LawFlash: FTC and DOJ Issue Antitrust Guidance for HR Professionals (Nov. 1, 2016).
4 Leah Nylen, Number of no-poach agreements uncovered by DOJ "shocking," official says, MLex Global Antitrust, (May 17, 2018).
5 Liz Crampton, "No-Poach" Deals Could Invite Criminal Antitrust Charges (Sept. 12, 2017) ("Nigro said he was 'surprised' to learn about the number of active no-poaching investigations DOJ is pursuing when he joined the division last month. So far, no criminal charges have been filed in these investigations, Nigro said. But he warned that more charges may be on the horizon.").
6 Matthew Perlman, Delrahim Says Criminal No-Poach Cases Are in the Works, Law360 (Jan. 19, 2018).
7 Andrew C. Finch, Principal Deputy Assistant Att'y Gen., Antitrust Div., US Dep't of Justice, Principal (Jan. 23, 2018).
8 See Antitrust HR Guidance, at 4; see also Press Release, Antitrust Division, US Dep't of Justice, Justice Department and Federal Trade Commission Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation (Oct. 20, 2016).
9 Matthew Perlman, Delrahim Says Criminal No-Poach Cases Are in the Works, Law360 (Jan. 19, 2018) ("If the activity has not been stopped and continued from the time when the DOJ's policy was made," in October 2016, "we'll treat that as criminal.")
10 Andrew C. Finch, Principal Deputy Assistant Att'y Gen., Antitrust Div., U.S. Dep't of Justice, Principal (Jan. 23, 2018) ("For agreements that began after the date of that announcement, or that began before but continued after that announcement, the Division expects to pursue criminal charges.")
11 Competitive Impact Statement, United States v. Knorr-Bremse AG & Westinghouse Air Brake Technologies Corp., No. 1:18-cv-00747 (DDC Apr. 3, 2018) (Competitive Impact Statement).
12 Competitive Impact Statement, at 12.
13 Antitrust HR Guidance, at 3 ("Naked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third-party intermediary, are per se illegal under the antitrust laws. That means that if the agreement is separate from or not reasonably necessary to a larger legitimate collaboration between the employers, the agreement is deemed illegal without any inquiry into its competitive effects.")
14 Press Release, Hong Kong Competition Commission, Competition Commission advises on practices in employment marketplace (Apr. 9, 2018), available here.
This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.
