Companies have long sought to prevent their competitors — particularly in skilled fields like life sciences, health care, software development and engineering — from benefiting from the talents and training of their employees.
Examples of such efforts include noncompete agreements between employers and employees, and carefully worded joint venture agreements that prohibit one partner from insourcing the know-how of another partner.
Although noncompete agreements between employers and employees have been subject to scrutiny for years, agreements between employers to restrict solicitation of each other’s employees or to fix employee wages have largely flown under the radar.
In fact, it was not until a little over four years ago that federal antitrust enforcers signaled that such agreements could be presumed illegal and criminally prosecuted. And even that policy change, significant though it was, did not bring an immediate uptick in enforcement activity.
That wait now appears to be over. The U.S. Department of Justice’s Antitrust Division has recently been aggressively bringing enforcement actions against labor market collusion, with more cases on the horizon.
To read the full text of this article (originally published in Law360) by Duane Morris partners Christopher Casey, Sean McConnell and Brian Pandya, please visit the firm website.
In an October 2016 guidance document, the United States Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission alerted human resources professionals to potential violations of the antitrust laws in hiring and compensation decisions. The guidance included the announcement that, “Going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements.” A naked agreement is one that is not ancillary to a broader, legitimate collaboration between businesses.
The DOJ’s decision to proceed criminally against such agreements is significant. Although the Sherman Act allows the DOJ to proceed either criminally or civilly against antitrust violators, before the guidance was issued the DOJ had treated agreements between competitors not to solicit each other’s employees as merely civil violations. Following the guidance, companies and individuals suddenly had to worry about criminal fines and potential jail sentences for entering into such agreements. Nevertheless, three years have now passed without a single such indictment being filed.
View the full Alert on the Duane Morris LLP website.
With the change of presidential administrations in January 2017, it was expected that the priorities of the U. S. Department of Justice (DOJ) would shift away from white-collar crime enforcement and towards immigration, violent crime, and narcotics enforcement. But recent data actually show a significant uptick in both prosecutions and convictions of individuals by the DOJ Criminal Division’s Fraud Section in 2018 over the previous two years. Moreover, the amount of money the DOJ recovered from companies through Deferred Prosecution Agreements (DPAs) or Non-Prosecution Agreements (NPAs) skyrocketed in 2018 .
Continue reading “2018 Data Show No Slowdown in Corporate Prosecutions at DOJ”
On November 29, 2018, Deputy Attorney General Rod J. Rosenstein announced the Department of Justice’s (DOJ) much-anticipated revisions to the September 2015 Memorandum on “Individual Accountability for Corporate Wrongdoing,” commonly known as the “Yates Memo” and named for Rosenstein’s predecessor, Sally Q. Yates. The Yates Memo emphasized the importance of holding individuals accountable for corporate misconduct, and set forth principles for DOJ prosecutors to follow in determining when corporations would qualify for “cooperation credit” in corporate criminal and civil investigations. The most significant—and controversial—provision in the Yates Memo required that “in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct.” The new policy announced by Rosenstein modifies this “all or nothing” approach to cooperation credit by giving DOJ prosecutors and civil attorneys more flexibility.
In announcing the new policy, Rosenstein reaffirmed the Department’s commitment to prosecuting individual wrongdoers, stating that, “The most effective deterrent to corporate criminal misconduct is identifying and punishing the people who committed the crimes.” However, he stated that the lack of flexibility in the Yates Memo’s approach impeded resolutions and wasted resources, and in some cases was not strictly enforced.
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On October 11, 2018, Assistant Attorney General for the Criminal Division of the U. S. Department of Justice (DOJ) Brian A. Benczkowski issued new guidance on the selection of corporate compliance monitors in Criminal Division matters. The Benczkowski Memorandum signals a shift toward a more business-friendly approach to the imposition and use of monitors by the DOJ. Among other new provisions, the guidance directs prosecutors to weigh the potential benefits of a monitor against the costs and burdens on the company, and to consider whether the company’s existing compliance program and controls obviate the need for a monitor.
Read the full Alert on the Duane Morris LLP website.
Duane Morris partners Christopher Casey and Damon Vocke will present a complimentary Directors Roundtable program, “Dealing with Corporate Crisis,” on Thursday, June 28, 2018, from 8:30 a.m. to 10:30 a.m. at the Deloitte Conference Center in New York City. For more information or to register, please visit the Directors Roundtable website.