Since 2010, the U.S. Department of Justice's (DOJ) Antitrust Division has carried out a series of investigations into a number of high-tech companies accusing them of playing by their own rules and stifling competition with "no cold call" agreements. “No cold call” is basically the practice whereby companies agree not to recruit each other’s highly skilled employees and conspire to fix and restrict their salaries at below-free-market rates. DOJ claims such agreements illegally allocate employees among competing employers and distort the competitive process in violation of federal antitrust laws.
While DOJ investigations targeted seven large tech companies, evidence revealed similar agreements between dozens of companies across various sectors. Company executives claim to have done nothing illegal; they didn’t know what their competitors were doing and that it was coincidental that identical non- solicitation policies were implemented at the same time with the same companies.
Emails and other evidence, however, present a scheme of secret cross-agreements between two or more parties to fix wages at a time when profits were threatened by soaring tech wages.
Seeking to avoid the revelation of this evidence at trial, many of the tech companies have settled with both DOJ and plaintiffs in civil lawsuits filed by affected employees. Their DOJ settlements included an agreement to discontinue the use of such hiring and employment practices, but did not contain an admission of guilt or any financial penalties.
Settlements with civil plaintiffs have also allowed the companies to avoid the treble damages of as much as $9 billion and enter into settlements in the neighborhood of $300 million and less — a drop in the bucket for companies worth billions of dollars.
Such agreements are reflective of a highly competitive industry with a strong demand for employees with advanced or specialized skills. However, they violate antitrust law by restricting competition and limiting employees' access to better job opportunities and higher pay. Furthermore, DOJ took issue with the fact that employees were unaware of and did not consent to the non-solicitation agreements.
Finally, the agreements served no unrelated pro-competitive, legitimate business purpose and were broader than reasonably necessary because they applied to all employees regardless of geography, job function, product group or time period.
Employers should take note of these lawsuits as representative of the potential for antitrust violations outside the traditional sales arena. Any restrictions placed on employees should be narrowly construed and serve a pro-competitive purpose, such as protecting trade secrets or ensuring the success of business transactions. Other types of agreements should also be scrutinized for any significant anti-competitive impact on the market that could signal potential antitrust violations.