In general, it is illegal for employers to agree not to compete for employees.
This means that employers cannot agree not to solicit another employer’s employees. These agreements are called “no-poach” or “no-hire” agreements and they are illegal.
In addition, employers cannot agree not pay their employees the same to prevent employees from bargaining for better pay. This is price-fixing and it is also illegal.
In a tight labor market, no-poach or no-hire agreements are especially helpful to employers—and harmful to employees—because they allow employers to pay employees less than the employees would earn in a free market.
When employers break the law, it is important to hold them accountable. Civil lawsuits can help employees capture the wages they lost through their employers’ price-fixing.
What is an Illegal Restraint of Trade?
Under State and federal law, it is illegal to interfere with a person’s ability to participate in the free market.
Price fixing is “per se” (automatically) illegal. Price fixing includes any agreement between competitors to control prices or terms of sale.
Price fixing can include agreements regarding what to pay or what to charge.
For example, an agreement to pay all software engineers the same amount is price fixing, as is an agreement to charge consumers the same amount for a good or service.
What are Non-Compete Agreements?
In California, non-compete agreements are almost always illegal. California’s non-compete law, Business & Professions Code Section 16600, provides that every contract that restrains workers’ ability to engage in a lawful trade or business is illegal.
This section has been construed to prohibit non-compete agreements. Put differently, it is your right to leave your job and work for a competitor.
If you have an illegal non-compete agreement in your employment contract and work in California, you should speak with an employment lawyer about your rights.
In most cases, you can just ignore the illegal clause and freely seek work with your employer’s competitors.
If your employer tries to enforce the illegal non-compete or if it prevents you from working for a competitor, you may be entitled to damages for your losses.
Under federal law, non-compete agreements are enforceable if they are reasonable restraints of trade. If they unreasonably interfere with your ability to work, they may be illegal.
This standard requires you to evaluate:
- The length of time you are prevented from competing
- The geographic region you are allowed to work in
- The employer’s need for the non-compete (i.e., do you have sensitive or trade secret information)
What are No-Poach Agreements?
A “no-poach” or “no-poaching” agreement is a promise by two or more employers not to compete for the other employers’ employees.
They are also known as “non-solicitation,” “no-recruiting,” or “no-hire” clauses. These agreements are illegal whether they are formal, written agreements or informal, oral agreements.
The DOJ and FTC take the position that “[a]n individual likely is breaking the antitrust laws if he or she … agrees with individual(s) at another company to refuse to solicit or hire that other company’s employees (so-called ‘no poaching’ agreements).”
These agreements are “per se illegal under the antitrust laws.” This is true even if the agreement is implemented through a third-party, like a recruiting agency.
The DOJ and FTC have brought antitrust litigation against employers who illegally agreed to carve up the market for employees.
For example, in Seaman v. Duke University, the DOJ sued Duke University for agreeing not to poach employees from the nearby University of North Carolina. Duke settled this case for more than $50 million.
Plaintiffs have also filed class actions against McDonald’s, Pizza Hut, Jimmy John’s, H&R Block, and many other entities for entering illegal no-poach agreements.
Are Antitrust Whistleblowers Protected?
Employees may learn of a no-poach or no-hire agreement with their employer or in their industry. If so, they should immediately contact an employment whistleblower lawyer for help protecting their rights.
In 2020, the US Congress enacted the Criminal Antitrust Anti-Retaliation Act, which protects whistleblowers who disclose violations of the antitrust laws.
This law provides that employers cannot fire, suspend, discipline, or harass anyone who reports violations of the antitrust laws to their employers or the federal government.
Whistleblowers are protected even if the conduct reported does not actually violate the antitrust laws.
Put differently, whistleblowers do not need to be lawyers to earn protection; if they have a good faith belief that the conduct is illegal, their employer cannot retaliate against them.
However, the whistleblower is not protected if they planned the illegal conduct themselves.
Can Antitrust Whistleblowers Sue Their Employer?
Antitrust whistleblowers can sue under a number of laws. These laws include, depending on the circumstances:
- The Criminal Antitrust Anti-Retaliation Act
- The Defense Contractor Whistleblower Protection Act
- The False Claims Act
- State Anti-Retaliation Laws like California Labor Code Section 1102.5
Under the Criminal Antitrust Anti-Retaliation Act, whistleblowers must file a complaint of retaliation with the Secretary of Labor. If the Secretary of Labor does not take action within 180 days, the employee may file a lawsuit in federal district court.
This probably means that the employee can file a lawsuit even if they have signed an arbitration clause that would normally require them to arbitrate employment claims.
The time limits for filing a complaint with the Secretary of Labor are short. Whistleblowers must file their complaint within 180 days of the illegal retaliation. If they don’t, they have missed the statute of limitations and will forfeit their federal claims.
Under California law, antitrust whistleblowers have additional protections. California law also allows whistleblowers to sue their employers for damages.
Labor Code Section 1102.5 provides that employers cannot retaliate against employees for reporting illegal conduct to any law enforcement agency or to the employer. The statute of limitations for Labor Code claims is three years—much longer than under federal law.
Because the laws governing antitrust whistleblowers are complicated, any employee who learns of price-fixing or other antitrust violations should immediately contact a whistleblower lawyer.
This will allow the employee to understand which laws protect them and to best plan a strategy for reporting the illegal conduct.
How Do You Prove Retaliation in an Antitrust Case?
The same standards apply to antitrust whistleblower cases as to other types of whistleblower cases.
Under federal law, employees must show that their protected activity—the whistleblower report—was a “contributing factor” in the adverse employment action. This standard is “broad and forgiving” and is construed in favor of the employee.
Evidence that meets this standard may include:
- Temporal proximity
- Deviation from established procedures
- The employer’s stated reasons for the adverse action are lies
- Different treatment of the whistleblower than comparator employees
After the employee meets this low burden, the employer must show that the protected activity did not contribute to the adverse employment action. This means the employer must show they would have taken the same action regardless of the protected activity.
Experienced, Highly Qualified Whistleblower and Antitrust Attorneys
We are uniquely qualified for challenging and complicated whistleblower and antitrust cases. Our attorneys previously litigated white-collar and other complex antitrust cases on the defense side at some of the country’s best law firms.
As a result, we are well versed in complex accounting and regulatory compliance issues.
And unlike most firms that handle qui tam and other whistleblower matters, we are also skilled employment attorneys who routinely prove and win retaliation cases. Few attorneys have this broad experience.
Contact us today to schedule a free consultation.