The U.S. Department of Justice (DOJ) is not backing down from the issue of no poach/no hire agreements between competitors, despite its early trial losses, as we predicted. On July 18, the DOJ submitted a “Statement of Interest” in Curtis Markson et. al. v. CRST International, Inc. et. al, C.D. Cal., no 5:17-cv-01261. The Statement of Interest lays out the DOJ’s position on no poach agreements – that they are per se illegal.1 This is the same stance the DOJ took in Jindal and DaVita, in which the DOJ’s allegations survived motions to dismiss although the defendants were found not guilty of the Sherman Act allegations after criminal trials in those cases.
Curtis Markson et. al. v. CRST International, Inc. et. al., is a private plaintiff case that was filed in 2017. The plaintiffs are current and former truck drivers for defendant transportation and logistics companies. The plaintiffs alleged that the defendants entered horizontal no-hire agreements under which they agreed not to hire drivers “under contract” with any of the other defendants. A driver can be “under contract” even if the driver no longer works for the company, if the driver has unpaid loans owed to the company. The plaintiffs also complain about CRST requiring drivers to enter into covenants not to compete that are so broad as to prohibit the drivers from working for any other motor carrier or even as an independent driver until any loans have been repaid. In denying the defendants’ motion to dismiss early last year, the court in Markson acknowledged that “no poach agreements among competitors are per se violations of the Sherman Act.”2
Statement of Interest
The DOJ now wants the court to apply that per se standard – and not the rule of reason – when analyzing the parties’ summary judgment briefs. The DOJ’s position, as it has consistently been, is that no poach/no hire agreements between competitors are a form of market allocation. Market allocation agreements have traditionally been a per se violation of the antitrust laws. A per se violation requires only that the plaintiffs establish that the defendants had such an agreement. There is no opportunity for defendants to argue that there were procompetitive justifications for the agreement or that the agreement had no effect on competition.
The Statement of Interest recognizes that there are some, albeit very limited, circumstances where no hire agreements could be analyzed under the rule of reason balancing test – in business association or joint venture type arrangements. However, even in those situations, the DOJ remains vigilant that the no hire provisions are narrowly tailored and ancillary to a separate, legitimate business collaboration. The DOJ specifically shot down defendants’ arguments that the no hire provisions in this case were necessary in order to re-coup the cost of training employees, to encourage investment in new employees, and to avoid tortious interference by competing companies. None of these reasons, according to the DOJ, justify a horizontal agreement between competitors not to hire each other’s employees.
The Federal Trade Commission (FTC) is also continuing to pursue its agenda to protect workers. In a press release issued the day after the DOJ filed the Statement of Interest, the FTC touted a Memorandum of Understanding (MOU) between it and the National Labor Relations Board (NLRB), which will allow the two agencies to more closely coordinate on antitrust and labor issues. This is similar to the MOU between the FTC and DOL signed earlier this year.
- Recent trial losses have not deterred the DOJ and FTC from their aggressive agendas to protect labor markets from antitrust violations.
- Common reasons companies put no hire agreements in place – protecting their investment in employees and avoiding litigation – will not persuade the agencies that agreements are legitimate.
- Companies should have competent counsel review any agreements with other entities that relate to the hiring or compensation of potential employees.
- Companies engaging with the NLRB or DOL should bear in mind that any antitrust concerns, like non-compete and no-poach agreements with competitors, may be referred to DOJ or FTC.