MiMfg Magazine December 2017 | Page 18

18 MiMfg Magazine December 2017 No Poaching Agreements Can Get You In Legal Hot Water By Steven J. Cernak • Schiff Hardin LLP Think the antitrust laws only apply to fixing the price of the products and services you sell? Think again. Agreements that restrict the hiring of certain people, or fix their salaries or benefits, might also violate the law. And as HR and other senior executives in the high-tech, fashion and hospital industries have found out, the enforcers are on the lookout for such agreements and the penalties can be huge. Competitors for Employees Antitrust law protects competition to hire employees as much as it protects competition to sell products and services. So agreements not to hire certain people (called “no-poaching” agreements) or on how they are compensated (called “wage- fixing” agreements) can be just as illegal. The agreements need not be formal or explicit to be illegal. Sometimes, merely discussing these topics with another employer and then acting like there is an agreement can be enough. Enforcement Continues in New Administration The issue has tripped up numerous employers in various industries around the country. In the high-tech industry, certain companies allegedly agreed on how each would — and would not — try to lure away the other company’s employees. In the fashion industry, a trade association allegedly coordinated an agreement among competitors to reduce fees paid to models. In one metropolitan area, all the hospitals allegedly lowered nurse wages uniformly by sharing private information. In all of these cases, the penalties were huge: large fines, huge settlements with victims, and executive distraction. The examples became so numerous that federal antitrust enforcers issued some guidance to HR professionals late last year. That new guidance clarified that certain egregious cases might even generate criminal penalties for the executives involved. This enforcement will not change in the new administration. Recent enforcement appointees have made clear that they have several live investigations, including some that might result in jail time. • Avoid agreements — and even the appearance of agreements — that seem designed to do nothing more than suppress compensation or put some potential employees off limits. Some Agreements About Employees Could Be Fine • Get some good guidance as you set up and implement any benchmarking or joint ventures with other companies that might affect how you compete for employees. Now, not all agreements with other companies about employees and their wages automatically violate the antitrust laws. Narrow restrictions that are a legitimate part of some other joint effort that will help competition — like a joint venture, merger or benchmarking — can be fine. Also, the enforcers have recognized as legitimate some no-poaching clauses in agreements with consultants and recruiters and similar provisions in employment and severance agreements. Useful Tips for Manufacturers So, what is a manufacturing executive to do? Here are a few steps to consider: • Make sure that you and anyone else involved in recruiting and compensation recognize that the antitrust laws apply as your company competes with other companies to attract and retain employees. Controlling all your costs, including employment costs, is critical to your company’s success. But any short-term savings from blatant “no-poach” or “wage-fixing” agreements will be swamped by the legal damages, fees and potential jail time. Real long-term cost containment is possible but only if done the right way. 6 Steve Cernak is an antitrust attorney in Ann Arbor at Schiff Hardin LLP. He may be reached at 734-222-1523 and [email protected]. Schiff Hardin is an MMA Associate member. Visit online: www.schiffhardin.com. These remarks are not intended as legal advice and do not necessarily represent the views of any of the firm’s past or current clients.