DOJ Settles “Anti-Poaching” Lawsuit

April 12, 2018

Knorr-Bremse AG and Westinghouse Air Brake Technologies Corp. (Wabtec) have settled antitrust allegations by the Justice Department (DOJ) that they illegally agreed not to hire each other’s employees, thereby depressing salaries and competition in the railroad equipment business. The two companies were the first charged under DOJ guidelines issued in October 2016, clarifying that “no-poach” agreements violate U.S. antitrust laws.

Under the terms of the proposed settlement, Knorr and Wabtec are prohibited from entering, maintaining, or enforcing no-poach agreements with any other companies, subject to limited exceptions. Knorr and Wabtec also must implement rigorous notification and compliance measures to preclude their entry into these types of anticompetitive agreements in the future.

While in a different industry, the settlement is cautionary tale for every business that agreements among companies to not hire their competitors’ employees within the same market sector are likely unlawful. DOJ contends that no-poach agreements are per se illegal restraints of trade in the labor market in which companies compete for employees because they are not reasonably necessary for a separate, legitimate business transaction or collaboration. DOJ says they eliminate competition in the same way as agreements to fix product prices or allocate customers.

The Trump Administration recently confirmed it is following Obama-era guidance for human resource personnel (given their proximity to hiring practices) to assist in identifying and reporting anti-competitive behavior such as agreements among employers not to compete for certain employees.

Separately, Sens. Cory Booker (D-NJ) and Elizabeth Warren (D-MA) introduced the “End Employer Collusion Act” in March, seeking legislatively to forbid any “anti-poaching” agreements among employers.