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Friday, April 20, 2018

Employer Agreeing Not To Poach Competitor's Employees? That's A Jailing

The Department of Justice's Antitrust Division is serious about going after employers who agree not to poach a competitor's employees. So serious, that they announced in 2016 they would start criminally prosecuting violators, and they recently announced some prosecutions are imminent. In a joint publication with the Federal Trade Commission titled Antitrust Guidance for Human Resource Professionals, the DOJ said this about no-poach agreements (these are my favorite excerpts):
From an antitrust perspective, firms that compete to hire or retain employees are competitors in the employment marketplace, regardless of whether the firms make the same products or compete to provide the same services. It is unlawful for competitors to expressly or implicitly agree not to compete with one another, even if they are motivated by a desire to reduce costs.  
Violations of the antitrust laws can have severe consequences. Depending on the facts of the case, the DOJ could bring a criminal prosecution against individuals, the company, or both. And both federal antitrust agencies could bring civil enforcement actions. In addition, if an employee or another private party were injured by an illegal agreement among potential employers, that party could bring a civil lawsuit for treble damages (i.e., three times the damages the party actually suffered).  
An individual likely is breaking the antitrust laws if he or she:  
  • agrees with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range (so-called wage-fixing agreements), or 
  • agrees with individual(s) at another company to refuse to solicit or hire that other company’s employees (so-called “no poaching” agreements). 
Naked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third-party intermediary, are per se illegal under the antitrust laws. That means that if the agreement is separate from or not reasonably necessary to a larger legitimate collaboration between the employers, the agreement is deemed illegal without any inquiry into its competitive effects.  
Going forward, the DOJ intends to proceed criminally against naked wagefixing or no-poaching agreements. These types of agreements 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. Accordingly, the DOJ will criminally investigate allegations that employers have agreed among themselves on employee compensation or not to solicit or hire each others’ employees. And if that investigation uncovers a naked wage-fixing or nopoaching agreement, the DOJ may, in the exercise of its prosecutorial discretion, bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies. 
Sharing information with competitors about terms and conditions of employment can also run afoul of the antitrust laws. Even if an individual does not agree explicitly to fix compensation or other terms of employment, exchanging competitively sensitive information could serve as evidence of an implicit illegal agreement. While agreements to share information are not per se illegal and therefore not prosecuted criminally, they may be subject to civil antitrust liability when they have, or are likely to have, an anticompetitive effect. 
Additionally, merely inviting a competitor to enter into an illegal agreement may be an antitrust violation – even if the invitation does not result in an agreement to fix wages or otherwise limit competition.  
Reports can be made to the Division through the Citizen Complaint Center by e-mail (antitrust.complaints@usdoj.gov), phone (1-888-647-3258, toll free in the U.S. and Canada, or 202-307-2040), or mail (Citizen Complaint Center, 950 Pennsylvania Avenue, NW, Room 3322, Washington, DC 20530).  
Reports can be made to the FTC through the Bureau of Competition’s Office of Policy and Coordination by email (antitrust@ftc.gov), phone (202-326- 3300), or mail (Office of Policy and Coordination, Room CC-5422, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580). 

In my opinion, this not only means that your employer cannot have a gentleman's agreement with a competitor not to hire each other's employees, but that such an agreement is prohibited even when it is done to settle a noncompete lawsuit involving a noncompete agreement of an employee.

If your employer is breaking the law, don't participate in those antitrust violations. You could land in jail. Instead, report them to the Department of Justice or the FTC. If you are the victim of a no-poach arrangement, contact an employee-side employment lawyer in your state.

Friday, April 13, 2018

Are You A Liar? Arbitration Is The Forum For You

Arbitration is very popular with employers, and no wonder. It's a liar's forum that employees can be blackmailed into. While courts penalize litigants for lying with heavy sanctions and dismissal of their claims/defenses, there is little a court can do when a litigant lies in an arbitration.

The Federal Arbitration Act, 9 U.S. Code § 10(a) provides:
In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration—

(1) where the award was procured by corruption, fraud, or undue means

The Florida Arbitration Act, Fla. Stat. § 682.13 provides:
Vacating an award.—

(1) Upon motion of a party to an arbitration proceeding, the court shall vacate an arbitration award if:

(a) The award was procured by corruption, fraud, or other undue means
However, courts have refused to interpret these provisions to allow a court to refuse to enforce an arbitration award procured by perjury, or to set aside judgments entered on awards procured by perjury, except where the perjury wasn't "discoverable upon the exercise of due diligence prior to or during the arbitration." And the perjury must, "materially relate to an issue in the arbitration."

This means that if you know a party is lying during the arbitration, can prove they lied, do your best to impeach them during the proceeding, and the arbitrator still enters judgment for the liar, you have no remedy. The court can't penalize the liar. Arbitration laws give judges almost no leeway to review an arbitration award.

In court, if the other side lies and you can prove it, but the jury finds for the liar anyhow, the judge can set aside the judgment. And if the trial judge doesn't do it, the appellate judge can. Judges hate liars.

This is just one of the many problems with the one-sided forum that is employment arbitration. Employers like it because there are almost no checks and balances. They mostly pick arbitrators that come from an employer-side background, and that tend to rule for employers. While many arbitrators, even from the employer side, try to be fair when wearing the neutral hat, many whose income depends on getting selected by employers are not. Rule for an employee and you can be blackballed from being chosen to arbitrate by employers. So what's a little lie between friends?

Employers in Florida and many states can force employees to sign arbitration agreements with a sign-or-be-fired threat, and the courts don't consider this to be duress. Everyone with any common sense understands that this is coercion, but it's allowed.

I used to be a strong believer in arbitration as a good way for parties to voluntarily choose to resolve disputes. But when one side can blackmail another into "voluntary agreeing" to arbitrate, then veto any arbitrators it knows might rule for employees, plus get away with lying at will, it's a travesty.