The US Department of Justice’s Antitrust Division will soon announce its first criminal charges involving “no poaching” agreements—agreements to refuse to solicit or hire another company’s employees—after previously announcing in October 2016 that the department would bring such enforcement actions under federal antitrust law.
The head of the US Department of Justice’s Antitrust Division (DOJ), Assistant Attorney General (AAG) Makan Delrahim, announced on January 19, 2018, that the DOJ will bring its first criminal cases involving alleged “no poaching” agreements in violation of the Sherman Act in the coming months. In particular, AAG Delrahim warned that if such activity “has not been stopped and continued from the time when the DOJ’s [new antipoaching] policy was made” in October 2016, “we’ll treat that [conduct] as criminal.” He added, “I've been shocked about how many of these [agreements] there are, but they're real.”
As we noted in our prior LawFlash following the October 2016 policy announcement, the DOJ and the Federal Trade Commission (FTC) jointly issued the Antitrust Guidance for Human Resource Professionals (the Antitrust HR Guidance), which signaled for the first time that the DOJ would “proceed criminally against naked wage-fixing or no-poaching agreements.” Moreover, under the Antitrust HR Guidance, this conduct may be considered per se illegal, meaning that companies could not normally escape liability by seeking to explain or justify such agreements.
With his remarks, AAG Delrahim underscored the recent DOJ focus concerning criminal prosecution of naked wage-fixing and no-poaching agreements. The enforcement efforts were also noted in September 2017 by then Acting AAG Andrew Finch.
In light of AAG Delrahim’s statements, companies should urgently consider reviewing their internal policies and practices to make sure their HR professionals and executives have not engaged in conduct that could be considered a no-poaching or wage-fixing agreement. The DOJ has made clear that engagement in such conduct or agreements after October 2016 when the policy was first announced may be criminally investigated and prosecuted.
As discussed in the Antitrust HR Guidance, the antitrust laws require employers to compete to hire or retain employees, so as to “help actual and potential employees through higher wages, better benefits, or other terms of employment.” No-poaching and wage-fixing agreements potentially violate these laws, as they may restrict competition among companies by employers agreeing not to recruit certain employees or not to compete for employees by offering competitive compensation or other similar terms. The risk of violating the antitrust laws is heightened if the no-poaching or wage-fixing agreement could be deemed a “naked” agreement (that is, not reasonably necessary for achieving a legitimate business purpose).
The DOJ and FTC have previously investigated and challenged no-poaching and wage-fixing agreements as violations of federal antitrust law. However, the agreements were treated as civil violations, and were usually settled with the charged companies committing to put an end to the agreements. For example, in 2010, the DOJ filed civil lawsuits against six large technology companies, and ended the matter by entering into settlements preventing the companies from entering into such agreements with employees.
As summarized in the Antitrust HR Guidance,
An individual likely is breaking the antitrust laws if he or she:
While the consequences and costs of a civil enforcement action can be significant, the penalties resulting from a criminal prosecution are even higher. In a criminal Sherman Act case, a company can face fines of up to $100 million, while individual HR professionals and executives can face fines of up to $1 million and up to 10 years’ imprisonment. Companies may also find themselves facing costly follow-on civil actions by employees or others alleging they were harmed by challenged no-poaching or wage-fixing agreements, which may result in the company having to pay treble damages and plaintiff attorney fees.
There are a number of measures that companies and in-house counsel can take to avoid criminal or civil exposure:
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
Thane D. Scott
Ronald E. Manthey
Debra L. Fischer
Stacey Anne Mahoney
 The comments were made at the January 19, 2018, Antitrust Research Foundation Conference held at the Antonin Scalia Law School at George Mason University. See Matthew Perlman, Delrahim Says Criminal No-Poach Cases Are in the Works, Law360 (Jan. 19, 2018).
 Antitrust HR Guidance, at 4 (Oct. 2016); 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); Morgan Lewis, LawFlash: FTC and DOJ Issue Antitrust Guidance for HR Professionals (Nov. 1, 2016).
 Press Release, Antitrust Division, US Dep’t of Justice, Acting Assistant Attorney General Andrew Finch Delivers Remarks at Global Antitrust Enforcement Symposium (Sept. 12, 2017) (“Your clients should be on notice that a business across the street from them—or, for that matter, across the country—might not be a competitor in the sale of any product or service, but it might still be a competitor for certain types of employees such that a naked no-poaching agreement, or wage-fixing agreement, between them would receive per se condemnation.”).
 Press Release, Antitrust Division, US Dep’t of Justice, Justice Department Requires Six High Tech Companies to Stop Entering into Anticompetitive Employee Solicitation Agreements (Sept. 24, 2010).
 DOJ has obtained higher criminal fines under the Alternative Fines Act. Under this statute, where any person derives “pecuniary gain” from the offense, or where “pecuniary loss” results “to a person other than the defendant,” then the court may fine the defendant “not more than the greater of twice the gross gain or twice the gross loss, unless imposition of a fine under this subsection would unduly complicate or prolong the sentencing process.” 18 U.S.C. § 3571(d).