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DOJ Fans the Flames in Support of Plaintiffs Suing Former Employers in Private Antitrust Fray

Shaking Hands

The Department of Justice Antitrust Division (the “DOJ”) recently put its thumb on the scale in favor of plaintiffs with respect to the standard to be applied in antitrust litigation involving purported “no-poach” agreements among competing employers. In a rare move, the DOJ filed a statement of interest in the ongoing lawsuit, In re Railway Industry Employee No-Poach Antitrust Litigation – a multi-district class action filed by several former employees against two of the world’s largest rail equipment suppliers. The plaintiffs allege that their former employers entered into unlawful agreements not to compete for employees by agreeing not to solicit or hire one another’s employees (otherwise known as “no-poach agreements”), which suppressed employment opportunities and wages for employees at both companies, in violation of federal antitrust laws.

The purported class action was filed on the heels of a DOJ investigation into no-poaching agreements between the defendant companies. As we reported in May 2018, DOJ’s investigation was resolved by a consent decree in which both companies agreed not to enter into, maintain or enforce any no-poach agreement.

In their motion to dismiss the class action, the defendants argued that no-poach agreements between competitors should always be evaluated under the rule of reason standard. By way of background, antitrust violations under the Sherman Act generally take one of two forms – a per se violation or a violation of the rule of reason. Per se violations, such as price-fixing, bid-rigging and agreements to allocate markets or customers, are clear cut and competitive injury is presumed. In contrast, the rule of reason analysis is applied to behavior that is more ambiguous and permits parties to introduce evidence that the challenged practice promoted competition or had no anticompetitive effect.

In its statement of interest, the DOJ challenged certain arguments made by defendants in their motion to dismiss that no-poach agreements between competitors should always be evaluated under the rule of reason standard. The DOJ encouraged the court to apply the per se standard to the no-poach agreements at issue, arguing (1) that “naked” no-poach agreements between separate firms (i.e., those not ancillary to a separate legitimate transaction or collaboration) constitute per se conduct, and (2) that the plaintiffs adequately pleaded a per se claim. The DOJ further sought (and obtained) court permission to participate in the hearing on the defendants’ motion to dismiss on the grounds that it has a “significant interest” in this case.

This latest development further signals that the DOJ is continuing its focus on anticompetitive behavior impacting employees and the labor market. Employers should consider carefully the DOJ’s recent actions and the Antitrust Guidelines for Human Resource Professionals, issued jointly by the DOJ and FTC in late 2016, before entering into agreements with competing employers regarding hiring and compensation.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.