The U.S. financial system depends on competition in order to maintain efficiency and fairness. Federal and state antitrust laws prohibit a wide range of anti-competitive activities in order to protect the public against monopolistic behaviors. This applies not only to commercial activities like buying and selling goods and services but also features of employment like hiring and salary decisions. When a group of employers makes anticompetitive agreements that harm workers, those workers may have recourse in court. A putative class action in California alleges that two companies entered into an unlawful “anti-poaching” agreement, by which each company agreed not to hire employees of the other company. Frost et al. v. LG Corporation et al., No. 5:16-cv-05206, consol. class action complaint (N.D. Cal., Nov. 8, 2016).
The main federal antitrust law in the U.S. is the Sherman Act of 1890, 15 U.S.C. § 1 et seq. It prohibits various anticompetitive activities, and it empowers the federal government to investigate businesses that have amassed significant market power, sometimes known as “trusts.” California’s Cartwright Act, Cal. Bus. & Prof. Code § 16720 et seq., contains similar provisions. A business does not violate antitrust law solely by attaining a monopoly in a particular market. A company that attains a monopoly by suppressing competition from others does violate antitrust law, however, as does a company that legitimately attains a monopoly and then suppresses competition in order to keep it.
Examples of anticompetitive activities prohibited by the Sherman and Cartwright Acts include price-fixing or boycott agreements between businesses that are otherwise competitors, as well as contractual terms that require customers or vendors to do business exclusively with a particular company. In the context of employment, employers may violate antitrust laws by making agreements to keep wages below a certain level for their employees, as well as anti-poaching agreements that keep employees from changing jobs within their field.
The two defendants in the putative class action are American subsidiaries of two major corporations based in South Korea. The lead plaintiff was an employee of one of the defendants in the Silicon Valley area from September 2012 to January 2014. He alleges that the defendants “have a long-standing agreement…not to solicit or hire one another’s workers.” Frost, complaint at 10. Poaching, which the plaintiff defines as “recruiting and hiring employees from a rival firm,” is “one of the only methods to hire experienced workers.” Id. at 12.
The plaintiff alleges that a recruiter contacted him in October 2013 about a job at the other defendant, but they quickly withdrew the inquiry on the ground that the two companies had an agreement not to “steal each other’s employees.” Id. at 14. Other plaintiffs had similar experiences and were generally unable to secure job interviews with one defendant or the other.
The lawsuit alleges a nationwide class of plaintiffs with claims under the Sherman Act, as well as a California class with claims under the Cartwright Act. The plaintiffs further allege on behalf of the California class that the anti-poaching agreement is void under Cal. Bus. Code § 16600, and the defendants have engaged in unfair competition under Cal. Bus. & Prof. Code § 17200 et seq.
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Judge Rejects Settlement Agreement in California Employment Class Action, Pleasanton Business & Commercial Law Blog, October 6, 2016