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UC Law Journal

Molly Edgar

Abstract

In 2016, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued a joint policy statement which notified human resource professionals of antitrust issues that may arise in the context of employee recruitment, hiring, and compensation. Among the various issues that the Agencies addressed was the use of no-poach agreements by employers. The Agencies stated that naked no-poach agreements, agreements between employers at different companies to refuse to solicit or hire one another’s employees, are per se illegal under federal antitrust law. Three years later, in a case involving a no-poach agreement, the DOJ filed a statement of interest that departed from the seemingly bright-line rule set forth in its previous joint policy statement. The DOJ took the position that the nature of the franchise system warrants an exception to the general rule—that naked no-poach agreements among employers are per se illegal—and suggested that the rule of reason analysis is the appropriate framework.

Since the DOJ issued its policy statement and subsequent statement of interest, federal district courts have taken varying approaches to franchise no-poach cases. Most have declined to determine the governing standard at the motion to dismiss stage due in part to the lack of agreement between the DOJ and other authorities of antitrust law, including some state attorneys general and the American Antitrust Institute. By adopting the per se standard, courts could easily dispose of franchise no-poach cases and thereby conserve judicial resources and create uniformity for litigants. The use of the per se standard to review franchise no-poach agreements comports with existing antitrust precedent, and the DOJ’s contrary arguments mischaracterize the nature of the franchise industry. Courts should decline to follow the DOJ’s reasoning in its statement of interest and impose per se liability for franchises that use no-poach agreements. Additionally, under the new administration, the DOJ should revisit the issue to reconcile its position with Sherman Act jurisprudence and its own previous guidance and enforcement actions.

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