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Jackson Hewitt will pay $10.8M to settle ‘no-poach’ allegations

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Dive Brief:

  • Tax preparation firm Jackson Hewitt and its affiliate Tax Services of America agreed to pay $10.8 million to resolve allegations they conspired to suppress employee wages and job mobility through “no-poach” arrangements with franchisees, according to a proposed settlement filed April 5 in a New Jersey federal court.
  • Per the class-action complaint in Robinson v. Jackson Hewitt, Inc., from at least 2003 through the present, Jackson Hewitt has allegedly required franchisees to sign agreements that severely restrict their ability to solicit, recruit and hire employees from other franchises or the firm’s corporate office.
  • Such agreements impede or restrict “the movement of employees between Jackson Hewitt and its franchisees” and allegedly violate Section 1 of the Sherman Antitrust Act by suppressing competition among franchisees for employees, decreasing employees’ job options and depressing their wages, especially if the lost opportunities were superior to the employees’ current jobs, the complaint asserted.

Dive Insight:

In 2016, the U.S. Department of Justice and the Federal Trade Commission issued a guidance cautioning HR practitioners that it’s illegal for employer representatives to agree to fix wages or to not hire one another’s workers.

The guidance specifically addressed HR professionals because DOJ and the FTC saw them as being in the best position to ensure compliance with the Sherman Act, the guidance indicated.

In particular, Section 1 of the act “bars every ‘contract,’ ‘combination,’ or ‘conspiracy’ that unreasonably restrains competition for workers’ labor,” including the so-called “no-poach” agreements — where firms agree not to hire, solicit or compete for each other’s workers, the DOJ explained in an amicus brief filed in support of the workers.

In the brief, the DOJ asserts that such agreements between firms competing to hire workers from the same labor pool are “per se” unlawful, unless a firm can show the agreement is “ancillary” or “subordinate and collateral to a separate, legitimate business collaboration … and reasonably necessary to achieve a pro-competitive objective.”

Jackson Hewitt argued that its agreements furthered two pro-competitive objectives: encouraging investments in employee training and strengthening the quality of its brand, the DOJ brief noted. However, DOJ said it found that facts in the nonsealed portion of the record suggested the agreements were not reasonably necessary to meet these objectives.

The brief appears consistent with DOJ’s strong stance against no-poach agreements, despite what may be a recent shift away from criminal enforcement. 

That is, for several years following the 2016 guidance, DOJ pursued criminal sanctions against businesses that used no-poach arrangements. But in November 2023, DOJ seemed to change its approach, abandoning its first-ever criminal indictment brought as part of a wider crackdown on no-poach agreements.

In court filings, DOJ did not articulate a reason for seeking to dismiss the case. Instead, it stated only that dismissal was “not contrary to manifest public interest” and “will allow the conservation of this Court’s time and resources.”

The Jackson Hewitt proposed settlement, which must be approved by the court, comes on the heels of another high-profile settlement in an employment-related Sherman Act case. Last month, the Ultimate Fighting Championship agreed to pay $335 million to settle allegations it violated Section 2 of the act. The plaintiffs, mixed martial arts fighters, claimed that UFC suppressed their compensation and prevented them from competing in the live MMA market.

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