Minami Tamaki is investigating “no-poach” and wage-fixing agreements between companies in numerous large industries.
A no-poach agreement involves companies agreeing not to compete for each other’s employees, such as by not soliciting or hiring them. A wage-fixing agreement involves an agreement regarding employees’ salary or other terms of compensation. No-poach and wage-fixing agreements that are not reasonably necessary to any separate, legitimate business collaboration between companies (known as “naked” agreements) are unlawful.
No-poach agreements have come under increased scrutiny in recent years, as critics argue that they rob employees of labor market competition, and deprive them of job opportunities and the ability to negotiate better terms of employment. Consumers have recently filed class actions against companies such as Burger King alleging that no-poach agreements illegally prevent employees from being hired or solicited from other franchises of the same brand. Some U.S. policy experts contend that no-poach and wage-fixing agreements have contributed to the low rate of wage growth in recent years in an otherwise robust economy.
The federal government has publicized its intention to target illegal agreements among competitors. In October 2016, the Antitrust Division of the Department of Justice (“DOJ”) and the Federal Trade Commission issued policy guidance warning that naked no-poach and wage-fixing agreements among companies would be treated as criminal antitrust violations.
This guidance followed on the heels of the DOJ filing civil enforcement actions against technology companies that allegedly entered into no-poach agreements with competitors, including Adobe, Apple, Google, Intel, Intuit, and Pixar.
Since issuing its guidance in October 2016, the DOJ has continued to demonstrate its willingness to pursue no-poach agreements. In April 2018, the Antitrust Division filed a civil antitrust lawsuit against rail equipment suppliers Knorr-Bremse AG and Westinghouse Air Brake Technologies Corp., and with it simultaneously filed a proposed civil settlement. The Complaint alleged that these companies and a third company, Faiveley, reached naked no-poach agreements in violation of Section 1 of the Sherman Act.
In July 2018, Attorneys General from 11 states formed a coalition to investigate no-poach agreements in franchise contracts of fast food chains, including Arby’s, Burger King, Dunkin’ Donuts, Five Guys, Little Caesars, Panera Bread, Popeyes, Wendy’s. Fast food chains, including Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carl’s Jr., Cinnabon, Jimmy John’s, and McDonald’s, also agreed in July 2018 to cease restricting individuals seeking employment from other branches of the same chain for higher pay.
This practice is not limited to fast-food chains. Jiffy Lube, H&R Block, and Anytime Fitness are among the other companies that have been reported to have had no-poach agreements in their franchisee contracts.
All business should be aware of developments in the law regarding no-poach and wage-fixing agreements, and should review their contracts for any such provisions. Franchised business, many of which have historically utilized contracts with no-poach provisions, should be particularly vigilant. Businesses and employees affected by no-poach and/or wage fixing agreements should consult with an attorney even if such provisions have not been enforced in the past.
For more information on our investigation and the current state of the law with regarding no-poach agreements, you may contact us online or at 415-788-9000. We look forward to the opportunity to speak with you.