ILMA Compoundings July 2018 - 43

WASHINGTON LANDSCAPE

Employee Poaching:
Rethinking Hiring Practices
By Daniel Bryant

K

norr-Bremse AG and Westinghouse Air Brake Technologies
Corp. (Wabtec) earlier this
year settled antitrust allegations by the
Justice Department (DOJ) that they
illegally agreed not to hire each other's
employees, thereby depressing salaries
and competition in the railroad equipment business.
The two companies were charged
under DOJ guidelines issued in October 2016, clarifying that "no-poach"
agreements violate U.S. antitrust
laws. The DOJ notes in the guidance
that "increased market concentration
of firms can also facilitate collusive
agreements that allow a small number
of employers, who compete over the
same workforce, to artificially suppress
wages below market rates or agree not
to hire one another's employees."
Under the terms of the settlement,
Knorr and Wabtec are prohibited from
entering, maintaining or enforcing
no-poach agreements with any other
companies, subject to limited exceptions. Knorr and Wabtec also must
implement rigorous notification and
compliance measures to preclude their
entry into these types of anticompetitive agreements in the future.
While in a different industry than
that of ILMA member companies, the
settlement is cautionary tale for every
business that agreements among companies to not hire their competitors'
employees are likely unlawful.
The DOJ contends that no-poach
agreements are per se illegal restraints
of trade in the labor market in which
companies compete for employees
because such agreements are not
reasonably necessary for a separate,
legitimate business transaction or

collaboration. The DOJ says they
eliminate competition in the same way
as agreements to fix product prices or
allocate customers.
Significantly, the DOJ noted in a
news release announcing the settlement
that the case was "part of a broader
investigation by its Antirust Division
into naked agreements not to compete
for employees." In January 2018, DOJ
officials confirmed that they would be
very active in reviewing additional antitrust violations pertaining to unlawful
hiring practices moving forward.
It is important to remember that the
DOJ can initiate a criminal prosecution
and/or a civil action in conjunction
with the Federal Trade Commission
(FTC) against an employer. Additionally, any employee or employer
could initiate a private civil cause of
action and may seek treble damages
(e.g., three times the damages actually
suffered) if he or she is harmed by the
unlawful hiring agreement.
Notably, the DOJ also recently stated
that if those unlawful agreements were
entered into after the October 2016
DOJ and FTC "Antitrust Guidance for
Human Resource Professionals"1 was
issued that the situation would likely be
treated as a criminal matter rather than
a civil offense.
Given those serious ramifications,
it is advisable for ILMA members to
examine their hiring practices with local
counsel and human resources staff.
As a threshold matter, employers
should educate themselves and their
employees about the issue. While many
employers are well-versed regarding
the prohibition of competitors setting
prices collectively, the awareness that
the antitrust laws similarly preclude

agreements not to hire competitor's
employees might be lacking.
The parties to the no-poach
agreement do not have to be direct
competitors in the sale of their
products to violate the antitrust laws;
instead, they just need to be competitors for the types of employees who are
subject to the agreement.
It also is important to remember
that anticompetitive no-poach agreements can lead to private antitrust
lawsuits after a successful government
case by those injured by the anticompetitive conduct.2
Employers would also be well-suited
to make the DOJ's antitrust guidance
document required reading for employees, especially those working in human
resources or with hiring authority.
Additionally, an internal audit, overseen by legal counsel, regarding in-house
hiring practices would be advisable.
Finally, ILMA members should
strongly consider implementing a
written compliance program that
expressly outlines the permissible
scope of hiring practices accompanied
by appropriate training to ensure that
there are no inadvertent missteps,
leading to undesirable inquiries from
the DOJ and/or the FTC.
1 For those ILMA members interested, the full
"Antitrust Guidance for Human Resource Professionals" can be downloaded here:
https://www.justice.gov/atr/file/903511/download
2 A private class-action suit on behalf of
employees has since commenced against
Wabtec and Knorr.

Bryant serves as regulatory
counsel to ILMA through
Bassman, Mitchell, Alfano &
Leiter Chtd. He may be reached
at 202-386-7670 or dbryant@bmalaw.net.

43
https://www.justice.gov/atr/file/903511/download
ILMA Compoundings July 2018

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