Cartel agreements on Human Ressources

May 2018

 

In times of a shortage of skilled workers, the competition for talented employees is becoming increasingly intensive and important. In the US, agreements between enterprises to not poach each other’s employees are specifically being treated as hard core breaches of antitrust law. In case of contraventions, even prison sentences might have to be reckoned with in individual cases. The US cartel authorities have issued corresponding guidelines on agreements regarding human resources. This “Antitrust Guidance for Human Resource Professionals” is not only relevant to US enterprises, for irrespective of the seat of an enterprise, US cartel law can also apply to a no-poaching agreement if it has effects upon the US market. Furthermore, the guideline offers helpful hints on assessing such agreements, which are also not uncommon in Europe and Germany.

 

No-poaching agreements

In the competition for employees, enterprises frequently agree not on so-called no-poaching agreements. The content of such agreements is usually to the effect that the parties undertake not to poach any of each other’s employees by directly approaching them, calling them or writing to them.

The most well-known case of a suspected anti-competitive poaching ban is the US proceedings brought against major enterprises of the IT industry in Silicon Valley. Amongst others, Steve Jobs of Apple and Eric Schmidt of Google, for example, are said to have agreed per e-mail that Google should dismiss an employee of the personnel department who had poached an Apple employee.

The proceedings, which commenced in 2009, ended in 2015 with a settlement to a sum of USD 415 million. However, the competent US federal court expressly established at such time that this procedure represented a per-se violation of the US cartel ban. With their need for employees, enterprises were raging a “war for talents” in direct cross-sector competition with each other. Agreements aimed at not poaching each other’s employees could restrict this competition and lead to worse employment conditions for the employees – especially with respect to their salaries. In such competition, consequently, competitors should reach their agreements on the recruitment of personnel independently and without coordination with other competitors.

In the “Antitrust Guidance for Human Resource Professionals”, the US cartel authorities deem such “no-poaching agreements” and so-called “wage-fixing agreements” (in which enterprises coordinate with each other on the remuneration of their employees) to be particularly serious cartel breaches. The guideline also clarifies that the US authorities will refrain in future from their current practice of ending such breaches through settlement. Rather, criminal legal consequences will regularly have to be expected in the future.

 

Poaching bans in collaborations and transactions

However, the US guideline also makes it clear that poaching bans (as well as non-compete clauses) between enterprises can be permissible under antitrust law as so-called “necessary ancillary agreements” within the scope of corporate collaborations or transactions. This essentially corresponds to the decision-making practice of the EU Commission and the national cartel authorities of the EU member states. Hence, for example, within the scope of a distribution cooperation, a poaching ban can be permissible under antitrust law if a special relationship of trust between the parties or the need for the protection of one of the two sides is to be given due consideration. In connection with corporate acquisitions, poaching bans are regularly permissible if, without such agreement, the merger could either not be executed at all or only subject to significantly more difficult conditions. Depending on the transferred asset values, however, poaching bans (just like non-compete clauses) are fundamentally restricted to a maximum of three years after the end of the collaboration, respectively execution of the transaction.

 

Practical effects

The US cartel authorities’ guideline gives rise to a need to cast a watchful eye on problematic situations of cartel law relevance within the scope of the internal company compliance, also regarding human resources, for the US practice does not only apply to enterprises situated in the US. For example, an agreed poaching ban between an US enterprise and an enterprise which is located in Germany and has a branch in the US can also fall under the regime of the US cartel law. Moreover, also pursuant to German and European antitrust law, coordinated conduct or agreements between employers concerning human resources can fall under the cartel ban (exceptions hereto exist only in connection with collective agreements). In this case, the US guideline can provide valuable orientation when making a legal appraisal and risk assessment.

 

Dr. Daniel Dohrn

Partner

Telephone: +49 221 2091 441
Telefax: +49 221 2091 333

daniel.dohrn@oppenhoff.eu

Dr. Andrés Martin-Ehlers, LL.M.

Partner

Telephone: +49 69 707968 182
Telefax: +49 69 707968 111

andres.martin-ehlers@oppenhoff.eu

Brazil, Central and South America, Mexico, Portugal, Spain

Dr. Simon Spangler, LL.M.

Partner

Telephone: +49 69 707968 183
Telefax: +49 69 707968 111

simon.spangler@oppenhoff.eu