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US companies fined for ‘anti-poaching’ agreement

Published: Friday 29th May 2015

Statue of liberty looking out at america

As the demand for skills becomes higher with the economic recovery, employers are beginning to see more of their staff being headhunted by rival firms. However, as seen in the US, entering into agreements with competitors to prevent ‘poaching’ can lead to legal action and big penalties for companies involved. Apple, Google, Intel and Adobe Systems have just proposed a $415 million settlement after a previous offer of $325 million was rejected by a judge in a class action case, as the result of an anti-poaching agreement between the companies.

In 2010, the four companies, along with Pixar, Lucasfilm and Intuit agreed not to hire each other’s employees. In 2011, a class action was filed on the basis that the anti-poaching agreement was a violation of anti-trust laws and artificially suppressed wages. The US Department of Justice ruled that this agreement eliminated competition to attract highly skilled employees. Now, the 64,000 plaintiffs, all workers, look now set to $5,200 after legal fees.

A spokesperson for Google said:

“Our policy only impacted cold calling, and we continued to recruit from these companies through LinkedIn, job fairs, employee referrals or when candidates approached Google directly. In fact, we hired hundreds of employees from the companies involved during this time period.”

Ramifications For The UK

The case sets a scary precedent for recruiters in the UK as the economy grows and skilled staff become increasingly difficult to source.

Alan Davis from Pinsent Mason’s competition team suspects that ‘anti-poaching’ agreements are already happening here and warns that such arrangements could be regarded as ‘anti-competitive agreements’ by the Office of Fair Trading in the UK or The European Commission and subject to fines of up to 10% of global turnover. Davis warns that recruitment agencies could also be at risk of legal consequences if they enter into what is known as a ’tripartite concerted practice’. This occurs where two clients come to a tacit understanding through an intermediary agency, that neither will poach the other’s employees.

“Client X and Y may not have actually talked to each other at all, but if they have reached an understanding through the intermediary of the agency it will have the same effect,” he explains.

Staying Compliant Is Vital

Angus Coulter of Hogan Lovells’ Competition and Economic Regulation practice, says that such agreements could be considered a breach of the Competition Act or Article 101 of the EU Treat. However, he added:

“This would only be where they have an appreciable effect on competition.’”

He also highlighted that it would have to be proved that it impacted on a high proportion of the industry.

While the US case is unlikely to have an immediate impact in the UK, it does, however, emphasise the need for employers and recruiters to ensure their own statutory compliance arrangements to ensure they are not breaching European or domestic law.

For more recruitment news, visit the recruiter news and views section on our website or follow us on Twitter @Zoekappuk.

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