On Thursday, August 8, 2019, the US Department of Justice (DOJ) announced that it will hold a public workshop on September 23 to discuss “the role of antitrust enforcement in labor markets and promoting robust competition for the American worker.”1
This workshop marks another step in the government’s ongoing efforts to address what it sees as competition concerns in practices affecting employee recruiting, hiring, and compensation. Recent Antitrust Division actions in this area include:
- in 2010, filing suit against Silicon Valley companies, including Adobe, Apple, Google, Intel, Intuit, and Pixar, for entering into a series of bilateral agreements to prevent the recruitment of each other’s employees (so-called “no poach” agreements);
- in 2016, issuing “Antitrust Guidance for Human Resource Professionals” that—for the first time—made clear that DOJ would use both its civil and criminal enforcement powers to address antitrust violations affecting labor markets (Mayer Brown’s December 2016 Legal Update describes the guidance in more detail);
- in 2018, filing a civil suit against Knorr-Bremse AG and Westinghouse Air Brake Tech. Corp. for allegedly entering into per seillegal employee no-poach agreements; and
- in 2019, submitting “statements of interest” in federal courts articulating its views on the application of the antitrust laws in various private employee no-poach cases.
Enforcement in this area is not limited to the Antitrust Division. State attorneys general have sought to limit the enforcement of agreements that affect the mobility of workers (primarily involving franchised business, including fast food chains, rent-to-own retailers, and shipping service providers).2 And many private class action cases—including follow-on actions to government settlements—seek damages on behalf of employees against companies ranging from medical schools to tax preparation chains. The issue is also attracting attention in political campaigns.
The Trump administration continues to prioritize aggressive antitrust enforcement in this area. Earlier this year, the Antitrust Division emphasized in forceful language the potential harms from anticompetitive agreements affecting employees: “Robbing employees of labor market competition deprives them of job opportunities, information, and the ability to use competing offers to negotiate better terms of employment.”3
However, the legal issues in these cases are not always crystal-clear. While certain practices— such as “naked” agreements to fix wages—uniformly are recognized as illegal, more difficult questions surround how to properly analyze employee-related restrictions in other contexts, such as when they may be part of joint ventures or other collaborations. Indeed, the Antitrust Division, certain state AGs, and a prominent consumer group are in the midst of a significant policy debate about the proper test for analyzing employee-related restraints that arise in a “vertical” context, such as those involving franchise agreements.4 One court has remarked on this clash of “titans of the antitrust arena,” noting that “the legal questions here are in their infancy, and this battle looks like one that will make its way through the courts for years to come.”5
Moreover, it should be noted that—despite the 2016 guidance and subsequent government speeches advocating a hard-line approach—the Antitrust Division has yet to bring a criminal case involving agreements affecting employees.
The Antitrust Division looks to be using the workshop to wrestle with how best to enforce—and advance—the law given the challenges raised in employee-related antitrust cases. According to the workshop announcement, the Antitrust Division intends to explore “the practical considerations that antitrust enforcers and private litigants face in bringing cases that involve labor markets” and “how to effectively develop cases challenging labor monopsony.”6
The workshop will not be able to resolve the challenges and legal questions, as the courts will remain the ultimate arbiters of what constitutes illegal restraints affecting employees. But it should provide additional guidance as to the types of conduct that the Antitrust Division finds objectionable and the government’s enforcement priorities in this area.
Mayer Brown will provide a further update after the workshop.
1 See Press Release, “Department of Justice Antitrust Division to Hold Workshop on Competition in Labor Markets,” Aug. 8, 2019, https://www.justice.gov/opa/pr/department-justice-antitrust-division-hold-workshop-competition-labor-markets.
2 As recently as August 8, 2019, the Attorney General of the State of Washington entered into separate settlements with Aaron’s, Inc. (a rent-to-own retailer), H&R Tax Services LLC, Mio Sushi International, Inc. (a fast food chain), and The UPS Store, Inc. relating to allegations that each included in their own franchise agreements language that restricted the ability of franchisees to solicit employees from a different franchise location. The settlements require each company to no longer include such language in their franchise agreements going forward and to not enforce such provisions in existing agreements. See In re Franchise No Poaching Provisions (Aaron’s, Inc.), No. 19-2-20768-0SEA, State of Washington, King’s County (Aug. 8, 2019); In re Franchise No Poaching Provisions (H&R Block Tax Services LLC), No. 19-2-20766-3SEA, State of Washington, King’s County (Aug. 8, 2019); In re Franchise No Poaching Provisions (Mio Sushi International, Inc.), No. 19-2-20771-6SEA, State of Washington, King’s County (Aug. 8, 2019); In re Franchise No Poaching Provisions (The UPS Store Inc.), No. 19-2-20768-8SEA, State of Washington, King’s County (Aug. 8, 2019).
3 “Division Update, Spring 2019,” https://www.justice.gov/atr/division-operations/division-update-spring-2019/no-poach-approach
4 Compare Statement of Interest of the United States of America, Stigar v. Dough, Inc. et al., No. 2:18-cv-00244-SAB (E.D. WA) (“Stigar”) (arguing that a restriction in a franchise agreement that forbids franchisees from poaching each other’s employees is subject to the rule of reason because it is a vertical restraint) with Amicus Curiae Brief by the Attorney General of Washington, Stigar (arguing that franchisors have a heavy burden to secure rule of reason treatment in such cases) with Letter of American Antitrust Institute to Ass’t Attorney General Makan Delrahim of the Antitrust Division (May 2, 2019), available at https://www.antitrustinstitute.org/wp-content/uploads/2019/05/AAI-No-Poach-Letter-w-Abstract.pdf (critiquing the Antitrust Division’s approach to no-poach cases involving franchise arrangements and arguing instead that such restrictions should be subject to per se or “quick look” condemnation).
5 Conrad v. Jimmy John’s, No. 3:18-cv-00133-NJR-RJD (S.D. Ill. May 21, 2019) (noting, in context of upholding decision to apply per se rule in no-poach case arising from a franchise agreement, that that the Antitrust Division is “certainly a titan in this arena” but is not the “ultimate authority on the subject”).
6 Press Release, “Department of Justice Antitrust Division to Hold Workshop on Competition in Labor Markets,” Aug. 8, 2019, https://www.justice.gov/opa/pr/department-justice-antitrust-division-hold-workshop-competition-labor-markets.