In Florida can two companies agree to not compete with each other for employees?
Can Florida businesses legally enter into a “no-poach” agreement?
The U.S. Department of Justice has taken the position that the no-poach agreements between competitors described above restrict competition for that industry’s workers, which limited their access to better job opportunities, restricted their mobility, and deprived them of competitively significant information that they could have used to negotiate for better terms of employment.
Essentially, under the antitrust laws, no-poach agreements that are naked (i.e., not reasonably necessary for a separate, legitimate business transaction or collaboration) eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers, which have traditionally been criminally investigated and prosecuted as hardcore cartel conduct.
Beginning in October 2016, the Department of Justice (DOJ) made several announcements that it intended to bring criminal, felony charges against culpable companies and individuals who entered into these types of no-poach agreements.
Recently the DOJ chose to pursue as civil violations no-poach agreements that were formed and terminated before those 2016 announcements were made. When the DOJ discovered no-poach agreements which had been terminated by the parties before October 2016, it filed a civil lawsuit against the two parties, Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation (Wabtec), two of the world’s largest rail equipment suppliers.
United States of America v. KNORR-BREMSE AG et al., Case # 1:18-cv-00747 (D.D.C. 2018)
The lawsuit recently settled and under the terms of the proposed settlement, the companies are prohibited from entering, maintaining, or enforcing no-poach agreements with any other companies, subject to limited exceptions. The settlement also requires the companies to implement rigorous notification and compliance measures to preclude their entry into these types of anticompetitive agreements in the future.
The settlement includes several new provisions that are designed to enforce the settlement, including that the parties will reimburse American taxpayers for the costs of investigating and enforcing any violations. This settlement prohibits the companies from maintaining employee “No-Poach” Agreements and requires cooperation in future antitrust division investigation of such agreements.
Florida business owners should realize that the DOJ is taking these no-poach agreements seriously and a Florida company that currently engages in such practice should immediately stop, or risk possible criminal penalties.
If you need any assistance in the area of non-compete or non-solicitation agreements in Florida, please email the Law Office of David Miklas, P.A. or call us at 1-772-465-5111.
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Situation: Two companies compete with each other to attract, hire, and retain various skilled employees, including project managers, engineers, executives, business unit heads, and corporate officers. The two companies reached agreements not to solicit, recruit, hire without prior approval, or otherwise compete with one another for employees. For example, the director of one company wrote a letter to a senior executive at the second company, “You and I both agreed that our practice of not targeting each other’s personnel is a prudent cause for both companies. As you so accurately put it, ‘we compete in the market.’”
Also, a wholly-owned subsidiary of one of these companies agreed with a subsidiary to the second company to get the other’s permission before pursuing each other’s employees. For example, a senior executive at one of the companies had a discussion with an executive at the other company that “resulted in an agreement between us that we do not poach each other’s employees. We agreed to talk if there was one trying to get a job.”
Further, a U.S. business unit of one of the companies similarly agreed with its competitor to not hire each other’s employees without prior approval. For example, in an e-mail to his colleagues, a company executive explained that a candidate for employment “is a good guy, but I don’t want to violate my own agreement with [the competitor].”