DOJ No-Poaching Agreements: A Closer Look

In the world of business, competition is inevitable. Companies compete for market share, talent, and resources. However, there are certain practices that can impede fair competition and harm both employees and consumers. One of these practices is the use of no-poaching agreements, which have been under scrutiny by the Department of Justice (DOJ) in recent years.

What are No-Poaching Agreements?

A no-poaching agreement is a contractual arrangement between two or more companies not to hire each other`s employees. Such agreements can be explicit or implied, and can take various forms such as non-compete clauses, no-solicitation clauses, or informal understandings among executives. The rationale behind these agreements is to prevent “poaching” of employees, which can lead to higher wages and turnover costs for companies.

Why are No-Poaching Agreements a Concern?

While no-poaching agreements may seem harmless, they can have serious anticompetitive effects. By agreeing not to hire each other`s employees, companies can limit job opportunities for workers and reduce their bargaining power. This can result in lower wages, fewer benefits, and less mobility for employees. It can also lead to a lack of innovation and productivity in the industry as talent is not free to move between companies.

Moreover, no-poaching agreements can violate antitrust laws if they restrain competition in the labor market. The DOJ has been cracking down on such agreements, especially in industries such as healthcare and tech where they have been prevalent. In 2016, the DOJ and Federal Trade Commission (FTC) issued joint guidance warning that such agreements can be illegal under antitrust laws and may result in civil or criminal actions.

What are the Implications for Employers?

Employers should be aware of the antitrust risks associated with no-poaching agreements and take steps to avoid them. This includes reviewing their employment contracts, policies, and practices to ensure that they do not contain anti-competitive language or restrictions. Employers should also train their managers and recruiters to avoid colluding with competitors on hiring practices.

The DOJ has indicated that it will continue to scrutinize no-poaching agreements and pursue enforcement actions against violators. In 2018, the DOJ settled with several companies, including rail equipment suppliers, for entering into no-poaching agreements with their competitors. Employers found in violation may face hefty fines, reputational damage, and legal expenses.

Conclusion

No-poaching agreements may seem like a reasonable way to protect companies` interests, but they can harm employees, restrict competition, and violate antitrust laws. Employers should take steps to avoid such agreements and ensure that their employment practices are compliant with antitrust laws. By promoting fair competition and free mobility of talent, companies can create more innovative and inclusive workplaces for their employees.