The Antitrust Division protects labor markets and employees by actively pursuing investigations into so-called “no-poach” and wage-fixing agreements between employers. When companies agree not to hire or recruit one another’s employees, they are agreeing not to compete for those employees’ labor. The same rules apply when employers compete for talent in labor markets as when they compete to sell goods and services. After all, workers, like consumers, are entitled to the benefits of a competitive market. Robbing employees of labor market competition deprives them of job opportunities, information, and the ability to use competing offers to negotiate better terms of employment.
A no-poach agreement involves an agreement with another company not to compete for each other’s employees, such as by not soliciting or hiring them. A wage-fixing agreement involves an agreement with another company regarding employees’ salary or other terms of compensation, either at a specific level or within a range.
No-poach agreements are naked if they are not reasonably necessary to any separate, legitimate business collaboration between the employers. Naked no-poach and wage-fixing agreements are per se unlawful because they eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers.
In October 2016, the Division announced that from that point forward, it intended to proceed criminally against naked no-poach and wage-fixing agreements. Since the October 2016 announcement, the Antitrust Division has consistently reinforced that message. For example, in a speech in January 2018, Principal Deputy Assistant Attorney General Andrew Finch stated that “the Division expects to pursue criminal charges” for agreements that began after October 2016, as well as for agreements that began before but continued after that date. In an exercise of prosecutorial discretion, the Antitrust Division will pursue as civil violations no-poach agreements that were formed and terminated before those announcements were made.
On April 3, 2018, the Antitrust Division filed a civil antitrust lawsuit against Knorr-Bremse AG and Westinghouse Air Brake Technologies Corp. (“Wabtec”), and with it simultaneously filed a civil settlement. The complaint alleges that these companies and a third company, Faiveley, reached naked no-poach agreements beginning as early as 2009 and continuing until at least 2015, in violation of Section 1 of the Sherman Act.
The competitive impact statement, filed simultaneously with the complaint, explains that these no-poach agreements are properly considered per se unlawful market allocation agreements under Section 1 of the Sherman Act. In the relevant labor markets, the agreements eliminated competition in the same irredeemable way as agreements to fix product prices or allocate customers, and they were not reasonably necessary for any collaboration between the firms. These no-poach agreements distorted competition to the detriment of employees by depriving them of the chance to bargain for better job opportunities and terms of employment.
The settlement is a strong, first-of-its-kind settlement that contains several provisions intended to terminate each defendant’s no-poach agreements and prevent future violations. It includes: (a) a broad injunction prohibiting each defendant from entering into or maintaining no-poach agreements among themselves and with other employers that will be in force for seven years; (b) an affirmative obligation to cooperate in any Division investigation of other potential no-poach agreements between the defendant and any other employer; (c) a requirement that each defendant affirmatively notify its U.S. employees and recruiters and the rail industry at large of the settlement and its obligations; and (d) the Division’s new consent decree provisions designed to improve the effectiveness of the decree and the Division’s future ability to enforce it.
Market participants are on notice: the Division intends to zealously enforce the antitrust laws in labor markets and aggressively pursue information on additional violations to identify and end anticompetitive no-poach agreements that harm employees and the economy.