New Jersey Antitrust Class Action Accuses Employers of “Anti-Poaching” Agreements

SeoulIn 2015, a group of technology companies settled a class action filed on behalf of thousands of employees for about $415 million. The lawsuit alleged that the defendants violated antitrust laws by entering into “anti-poaching” agreements, by which they agreed not to solicit or hire each other’s employees. These types of agreements make it difficult, if not impossible, for workers to advance in their fields, and they also tend to drive wages downward. More recently, a putative class action that partly originated in New Jersey made similar allegations against two major electronics companies. Frost v. LG Corp., et al., No. 5:16-cv-05206, complaint (N.D. Cal., Nov. 8, 2016). A judge granted the defendants’ motion to dismiss the case in April 2017, based on pleading defects, but will allow the plaintiffs to make corrections in an amended complaint. The case remains a good example of how state and federal antitrust laws can affect employment.

The main federal antitrust statute is the Sherman Act, originally enacted by Congress in 1890 in an effort to address monopolistic practices across the country. It prohibits any “contract…in restraint of trade or commerce among the several states,” 15 U.S.C. § 1, and allows both civil and criminal penalties. The New Jersey Antitrust Act uses almost identical language to describe prohibited contracts. N.J. Rev. Stat. § 56:9-3. The attorneys general at the state and federal levels are empowered to investigate and prosecute anticompetitive practices, and both state and federal laws allow civil causes of action by aggrieved parties.

The Frost lawsuit is actually a consolidation of two lawsuits filed in California and New Jersey. It asserts claims on behalf of three classes of employees:  nationwide, in California, and in New Jersey. The two defendant employers are American subsidiaries of South Korean companies. Their parent companies are also named as defendants. The lead plaintiff for the New Jersey class worked for one of the defendants in Englewood Cliffs for about eight years, beginning in 2006.

The plaintiffs allege that the defendants entered into an anti-poaching agreement at the highest corporate levels in South Korea. Since the two companies have similar “corporate cultures” and “comparable product lines,” each company is “the most likely alternative workplace” for the other’s employees. Frost, complaint at 10-11. The complaint further notes that recruiting employees from competitors, also known as poaching, “is one of the only methods to hire experienced workers.” Id. at 12. An anti-poaching agreement negatively affects employees’ wages and career prospects.

The lawsuit asserts causes of action under the Sherman Act on behalf of a nationwide class of people employed by the defendants during the past 12 years. The California and New Jersey classes assert similar claims under state laws.

On April 21, 2017, a federal judge granted the defendants’ motion to dismiss the lawsuit but gave the plaintiffs leave to amend the complaint to address the issues found by the court. The court found that the plaintiffs’ allegation of a chaebol—a term that relates to South Korea’s corporate culture—was insufficient to demonstrate the role of each defendant in an unlawful anti-poaching scheme. If the plaintiffs can plead additional facts suggesting a direct agreement between the American subsidiaries, the case may proceed.

To speak with an employment attorney about a matter in New Jersey or New York, contact the Resnick Law Group today online, at 973-781-1204, or at 646-867-7997.

More Blog Posts:

Supreme Court to Consider Whether Class Action Waivers Are Enforceable in Employment Disputes, The New Jersey Employment Law Firm Blog, April 5, 2017

White House Calls on States to Limit the Scope of Non-Compete Agreements, The New Jersey Employment Law Firm Blog, December 23, 2016

Employment Practices That Violate Antitrust Laws Can Have Both Civil and Criminal Penalties, The New Jersey Employment Law Firm Blog, December 9, 2016

Photo credit: Evilbish (Own work) [CC BY-SA 3.0], via Wikimedia Commons.

Contact Information