The manner in which the enforcement action was resolved provides further insight as to how antitrust laws will be applied to human-resource decisions in the future. Additional criminal and civil investigations remain pending and are expected to be announced in the near future.
The US Department of Justice’s Antitrust Division (DOJ) announced its first civil enforcement action on April 3 following the October 2016 joint policy announcement by DOJ and the Federal Trade Commission (FTC): Antitrust Guidance for HR Professionals (the Antitrust HR Guidance). That milestone guidance was intended “to alert human resource (HR) professionals and others involved in hiring and compensation decisions to potential violations of the antitrust laws” and the agencies’ intent to bring future enforcement actions for such antitrust law violations. Critically DOJ also stated for the first time that it would “proceed criminally against naked wage-fixing or no-poaching agreements.”
DOJ initiated the civil enforcement action by filing a complaint in federal court in Washington, DC against “two of the world’s largest rail equipment suppliers”, alleging that they had engaged in illegal “no-poach” agreements with each other and, later, with a third rail equipment supplier. The companies have indicated their intent to stipulate to a civil consent judgment that remains subject to the approval of the court under the terms of the Antitrust Procedures and Penalties Act, 15 USC § 16(b)-(h).
We previously commented on the antitrust issues and implications of the Antitrust HR Guidance both in the United States and internationally. We also issued a Frequently Asked Questions summary to address common recurring questions and concerns on this subject.
The new civil enforcement action is instructive and highlights some key takeaways and issues for companies that may become subject to either criminal or civil enforcement inquiries. Since more enforcement actions are expected, the manner in which this case was resolved likely will establish a foundation for future cases.
A number of issues are noteworthy:
The DOJ court filing defines a “no-poaching” agreement as “any Agreement, or part of an Agreement, among two or more employers that restrains any person from cold calling, soliciting, recruiting, hiring, or otherwise competing for (i) employees located in the United States being hired to work in the United States or outside the United States or (ii) any employee located outside the United States being hired to work in the United States.” This definition broadens the scope of conduct to which the “no-poaching” prohibitions will apply.
In this case, the DOJ instituted a civil enforcement action instead of pursuing criminal charges against the defendant companies solely “because the United States uncovered and began investigating the agreements, and the defendants terminated them, before the United States had announced its intent to proceed criminally against such agreements.” This DOJ investigation extended over a substantial period.
If this same conduct had occurred after October 2016, it likely would have been prosecuted as a criminal rather than a civil case. In fact, according to court filings by DOJ, it was only “[a]s a matter of prosecutorial discretion” that DOJ will “pursue No-Poach Agreements entered into and terminated before” October 2016 “through civil actions for equitable relief.”
Based on recent DOJ statements and continuing DOJ focus, a number of criminal investigations are underway. In the near future, criminal cases are expected to be announced by DOJ.
However, the filings left open the possibility that future conduct could meet this exception if the following elements were met. The agreement is (1) “in writing and signed by all parties”; (2) “identif[ies], with specificity, the Agreement to which it is ancillary”; (3) is “narrowly tailored to affect only employees who are reasonably anticipated to be directly involved in the Agreement”; (4) “identif[ies] with reasonable specificity the employees who are subject to the Agreement”; and (5) “contain[s] a specific termination date or event.” It is strongly recommended that any narrowly tailored agreement be reviewed by experienced antitrust counsel if it is relied upon.
As we previously noted, other enforcers are also focusing on the enforcement of antitrust laws on HR decisions. For example, on April 9, the Hong Kong Competition Commission issued new guidance.
Unilateral conduct is not impacted by the Sherman Act. As noted in the DOJ court filing, “a Defendant is not prohibited from unilaterally adopting or maintaining a policy not to consider applications from employees of another person, or not to solicit, cold call, recruit or hire employees of another person, provided that the Defendant does not (1) request, encourage, propose, or suggest that another person adopt, enforce, or maintain such a policy; or (2) notify the other person that the Defendant has adopted such a policy.”
We will continue to monitor DOJ and FTC developments in applying the antitrust laws to human-resource decisions. In the meantime, please advise if you have questions or need assistance with review of issues and facts concerning antitrust issues involving HR decisions; compliance training to HR personnel and other executives; review, modification, or mitigation of no-poaching terms; or consideration of mitigation steps such as the Antitrust Division’s Leniency Program.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Mark L. Krotoski
Anne Marie Arcadi
Debra L. Fischer
Stacey Anne Mahoney
Willard K. Tom
 Antitrust Guidance, at 4; see also Press Release, Antitrust Division, US Dep’t of Justice, Justice Department and Federal Trade Commission Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation (Oct. 20, 2016).
 Press Release, Antitrust Div., US Dep’t of Justice, Justice Department Requires Knorr and Wabtec to Terminate Unlawful Agreements Not to Compete for Employees (Apr. 3, 2018), available here; see also Complaint, United States v. Knorr-Bremse AG & Westinghouse Air Brake
Technologies Corp., No. 1:18-cv-00747 (DDC Apr. 3, 2018) (Doc. No. 1).
 See Morgan Lewis, LawFlash: DOJ Antitrust Division Announces Imminent Criminal Prosecution for ‘No Poaching’ Agreements (Feb. 6, 2018); see also Morgan Lewis, LawFlash: Are Your Employment Practices in Breach of Antitrust Law? (Mar. 30, 2018); Morgan Lewis, LawFlash: FTC and DOJ Issue Antitrust Guidance for HR Professionals (Nov. 1, 2016).
 Antitrust HR Guidance, at 3.
 Competitive Impact Statement, at 13 (footnote omitted), United States v. Knorr-Bremse AG & Westinghouse Air Brake Technologies Corp., No. 1:18-cv-00747 (DDC Apr. 3, 2018) (Doc. No. 3) [hereinafter Competitive Impact Statement].
 Competitive Impact Statement, at 12.
 Antitrust HR Guidance, at 3.
 Competitive Impact Statement, at 11.
 Antitrust HR Guidance, at 3. “Legitimate joint ventures (including, for example, appropriate shared use of facilities) are not considered per se illegal under the antitrust laws.”
 Competitive Impact Statement, at 8 (“No-Poach Agreements that are not reasonably necessary to any separate, legitimate business transaction or collaboration are properly considered per se unlawful market allocation
agreements under Section 1 of the Sherman Act.”); id. at 3 (“The No-Poach Agreements were not reasonably necessary to any separate, legitimate business transaction or collaboration between the companies”); see also Press Release, Antitrust Div., US Dep’t of Justice, Justice Department and Federal Trade Commission Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation (Oct. 20, 2016), available here. (“Going forward, the Justice Department intends to
criminally investigate naked no-poaching or wage-fixing agreements that are unrelated or
unnecessary to a larger legitimate collaboration between the employers.”) (emphasis added).
 Proposed Final Judgment, § V(B), United States v. Knorr-Bremse AG & Westinghouse Air Brake Technologies Corp., No. 1:18-cv-00747 (DDC Apr. 3, 2018) (Doc. No. 2-1, Exh. A) [hereinafter Proposed Final Judgment]; see also Competitive Impact Statement, at 13 (explaining terms).
 Competitive Impact Statement, at 14-17.
 Proposed Final Judgment, § V(C).
 Competitive Impact Statement, at 13 (footnote omitted), United States v. Knorr-Bremse AG & Westinghouse Air Brake Technologies Corp., No. 1:18-cv-00747 (DDC Apr. 3, 2018) (Doc. No. 3).
 15 USC § 1. In a court filing, DOJ clarifies that “agreement” includes “any agreement, understanding, pact, contract, or arrangement, formal or informal, oral or written, between two or more persons.” Competitive Impact Statement, at 13 n.9.
 Competitive Impact Statement, at 14.