A MoForward Warning Comes True: No Poach Enforcement Hits the Defense Industry

At our annual MoForward event in October 2021, Lisa Phelan offered practical advice about avoiding U.S. Department of Justice (DOJ) criminal antitrust enforcement of “no poach” agreements, predicting the defense industry would soon become a target. Regrettably, Lisa’s prediction has come true.

Enforcement Has Expanded to Defense Contracting

On December 16, 2021, the DOJ announced an indictment charging a former government contractor employee and five employees of its suppliers for alleged no poach agreements related to hiring engineers. Although no companies have been charged yet, the DOJ’s press release indicates its investigation is ongoing, and the executives’ companies are identified as unindicted co-conspirators. No doubt, there is more to come. Once the DOJ gets inside a particular industry, it drills down and one investigation often leads to another.

Increased Criminal Enforcement Is Focused on Labor Markets

This case underscores the Biden administration’s priority to detect antitrust violations in labor markets and to enforce the antitrust laws aggressively in them. This includes agreements between competing employers not to hire or recruit one another’s employees—the so-called “no poach” agreements. Historically, the DOJ treated no poach agreements as civil antitrust violations, but, in 2016, it announced it would prosecute these types of agreements as criminal violations. As always, antitrust remedies are daunting: Companies face criminal fines of $100 million or more, and executives face up to 10 years in prison. Since January 2021, the DOJ has brought a number of criminal cases involving no poach agreements and agreements related to employee compensation. Up until last week, these cases had largely focused on the healthcare industry.

Hiring and Compensation Must Be Covered in Antitrust Compliance Training

Given this current environment, we are reminding clients to make sure their antitrust compliance programs include specific guidance related to no poach and compensation issues, and to ensure that employees involved in hiring decisions receive antitrust training covering these issues. We can help. Lisa Phelan and her colleague, Megan Gerking, previously served as antitrust prosecutors at the DOJ and now regularly assist companies with labor market antitrust issues, from counseling and training to investigations and litigation. Lisa and Megan would be happy to meet (virtually, as appropriate) if you would like to learn more about the DOJ’s enforcement efforts or if you have any questions or concerns about your hiring and compensation practices and how the DOJ might view them.