Antitrust Law Daily Rail suppliers agree to refrain from using employee recruitment ‘no poach’ agreements
Tuesday, April 3, 2018

Rail suppliers agree to refrain from using employee recruitment ‘no poach’ agreements

By Edward L. Puzzo, J.D.

Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation (Wabtec), two of the world’s largest rail equipment suppliers, have reached a settlement with the Department of Justice Antitrust Division over a civil challenge to their purported agreements not to poach employees, the Justice Department has announced (U.S. v. Knorr-Bremse AG, Civil Action No. 1:18-cv-00747).

According to the government’s complaint, Knorr and Wabtec compete with each other to attract, hire, and retain various skilled employees, including project managers, engineers, executives, business unit heads, and corporate officers. Since at least 2009, Knorr and Wabtec had in place agreements not to solicit, recruit, hire without prior approval, or otherwise compete with one another for employees, it was alleged.

The Justice Department contended that the no-poach agreements were per se illegal restraints of trade in the labor market in which they competed for employees. Under the antitrust laws, no-poach agreements that are naked—that is, 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.

Threat of criminal prosecution. Beginning in October 2016, the Justice Department started making announcements that it intended to bring criminal, felony charges against culpable companies and individuals who entered into these types of no-poach agreements. In an exercise of prosecutorial discretion, the Justice Department said it would pursue as civil violations no-poach agreements that were formed and terminated before those announcements were made. Knorr’s and Wabtec’s respective no-poach agreements were discovered by the Antitrust Division and terminated by the parties before October 2016, prompting the Antitrust Division to resolve its competition concerns through a civil action.

Settlement. Concurrently with the filing of the civil antitrust lawsuit in the federal district court in Washington, D.C., challenging Knorr and Wabtec’s alleged no-poach agreements, the Antitrust Division filed a proposed settlement with the court. If approved, the consent decree would resolve the government’s competitive concerns.

Under the terms of the proposed settlement, Knorr and Wabtec are prohibited from entering, maintaining, or enforcing no-poach agreements with any other companies, subject to limited exceptions. The settlement also requires Knorr and Wabtec to implement rigorous notification and compliance measures to preclude their entry into these types of anticompetitive agreements in the future.

"The unlawful no-poach agreements challenged today restrained competition for employees and deprived rail industry workers of important opportunities, information, and the ability to obtain better terms of employment," said Makan Delrahim, Assistant Attorney General in charge of the Antitrust Division. "Today’s complaint is part of a broader investigation by the Antitrust Division into naked agreements not to compete for employees—generally referred to as no-poach agreements. As part of today’s settlement, Knorr and Wabtec are required to cooperate with the Antitrust Division in any investigation into additional no-poach agreements to which they may have been counterparties."

The case is No. 1:18-cv-00747.

Attorneys: Doha Mekki, U.S. Department of Justice, for the United States. Mark Hamer (Baker & McKenzie LLP) for Knorr-Bremse AG. Craig Waldman (Jones Day) for Westinghouse Air Brake Technologies Corp.

Companies: Knorr-Bremse AG; Westinghouse Air Brake Technologies Corp.

MainStory: TopStory Antitrust AntitrustDivisionNews

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