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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.
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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.