Government Contracts & Investigations

No-Poach Agreements between Government Contractors May Violate Antitrust Laws

By | February 19, 2019

A group of U.S. government contractors are being accused of entering into illegal no-poaching agreements with each other. On February 7, a putative class consisting of current and former employees filed suit against Booz Allen Hamilton, CACI, and Mission Essential alleging antitrust violations. See Hunter v. Booz Allen Hamilton Holding Corp., No. 2:19-CV-411 (S.D. Ohio). The plaintiffs, who all worked at the Joint Intelligence Operations Center Europe Analytic Center in Molesworth, England, claim their employers agreed not to hire each other’s employees, in violation of U.S. antitrust laws including the Sherman Act and Clayton Act.

The terms of the government contracts required the contractors’ employees to be U.S. citizens with top-secret security clearances. According to plaintiffs, due to the relative scarcity of prospective employees matching these criteria who were also willing to move to England, such workers were in high demand and generally able to move freely between defendants to increase their compensation. Plaintiffs allege defendants made the no-poach deal to fix and maintain compensation for skilled labor at artificially low levels.

The lawsuit alleges these actions had the effect of eliminating competition for skilled labor, restricting employee mobility, and suppressing wages for the purpose of increasing profits. According to the Complaint, due to the high cost of moving back to the United States and the lack of employment opportunities in England outside the intelligence contracting world, workers “were essentially defendants’ captives.”

Plaintiffs seek a finding that the defendants’ actions are per se violations of the Sherman Act. Plaintiffs are likely to rely heavily on an October 2016 joint publication issued by the US Department of Justice and Federal Trade Commission, Antitrust Guidance for Human Resources Professionals, which states that “an agreement among competing employers to limit or fix the terms of employment for potential hires may violate antitrust laws if the agreement constrains individual firm decision-making with regard to wages, salaries, or benefits; terms of employment; or even job opportunities.” According to the publication, naked wage-fixing or no-poaching agreements among employers are per se illegal under the antitrust laws.

However, Plaintiffs in this case may have a steep hill to climb. In a recent filing in a separate class action, the U.S. Department of Justice (“DOJ”) cast doubt on employers’ ability to rely on the 2016 publication. The DOJ argued that no-poach deals that are part of a broader business relationship or collaboration between the companies may warrant the rule of reason analysis, which requires that plaintiffs prove the harm done by anti-competitive conduct outweighs any pro-competitive results.

Before entering into any agreements related to no-poach, no-solicit, no-hire or other restrictions between employers, government contractors should consult with counsel to ensure their agreements and practices do not violate antitrust laws. Restrictive agreements should be carefully crafted and limited so the restraint aligns with the legitimate needs of the employer.

For further information about E.O. 13858 and how the new requirements may impact your business, contact one of the members of Stinson Leonard Street’s Government Contracts and Investigations Practice Group.

 

Contact Erin Naeger for more information.