This article was originally published on the Venable Insights blog.
Article by Grace H. Lee and Imani T. Menard, Venable LLP
As we enter hiring season in a very tight job market, school administrators may feel tempted to reach an understanding with other school leaders not to recruit or hire employees from each other. The Department of Justice (DOJ) has been increasingly monitoring no-poach agreements, and recently stated that no-poach agreements may constitute a criminal antitrust violation. Unlike non-compete agreements, which are between employers and employees, a no-poach agreement is an agreement between employers not to solicit employees from one another. Independent schools should be mindful of increased scrutiny of these types of practices, especially in light of recent cases.
A Colorado district court recently upheld the DOJ's view that no-poach agreements may constitute a criminal antitrust violation. In the case U.S. v. DaVita, the defendants were found to have violated antitrust laws by agreeing with medical facilities not to solicit their employees. The court held that "naked" no-poach agreements, stand-alone agreements between competitors, constitute market allocations in violation of antitrust laws. However, the court stated that no-poach agreements that are related to, or are reasonably necessary for, a separate legitimate collaboration or transaction may be upheld, depending on the positive and negative effects of the agreement.
Antitrust laws prohibit agreements between competitors that unreasonably restrain trade, and no-poach agreements may violate antitrust laws, depending on their context and restrictions. Antitrust issues can arise at independent schools in various ways, including, but not limited to, from agreements by independent schools on employee salaries and benefits, or agreements on fixed tuition or financial aid benefits.
Moreover, antitrust issues can also arise when independent schools collect and share data with competing schools. In order to avoid antitrust violations when sharing data for purposes of benchmarking, independent schools should have data collected by a third party; ensure that any information provided is more than three months old; and have data aggregated so that it would not be possible to identify the data of a particular school or person.
Penalties for No-Poach Agreements
No-poach agreements can be subject to criminal or civil violations. Criminal violations may be brought by the DOJ and could include fines, consent decrees, and other penalties. Civil violations may be brought by the DOJ, Federal Trade Commission, or other impacted individuals, and could include subpoenas, injunctive relief, and attorneys' fees.
Practical Guidance for Independent Schools
Independent schools should ensure that they are not engaging in invalid no-poach agreements. Among other things, independent schools should avoid entering into agreements that limit the recruitment of employees or students. Independent schools should also avoid entering into agreements that impact the finances of employees or students, including salary levels, benefits, and tuition. It is also wise for independent schools to provide training to their employees regarding competition and unreasonable restraints on trade.