Examining Key Economic Issues in Anti-Poaching and Pay Equity Litigation

Moshe Buchinsky: Professor of Economics, UCLA

Employment-related litigation has been on the rise in recent years, including class actions involving anti-poaching agreements and pay equity in a variety of industries. To gain a better understanding of some of the key economic factors underlying these cases, we spoke with Moshe Buchinsky, Professor of Economics at UCLA and an Analysis Group affiliate. An expert in econometrics and labor economics, Professor Buchinsky has published extensively on employee mobility and the dynamics of gender wage distributions – both of which are key to understanding the economic implications of the allegations put forth in recent employment litigation. He has also consulted on a wide range of litigation matters in labor and employment, including age, race, and gender discrimination class actions in retail, pharmaceutical, financial, and manufacturing sectors.

Q: There have been a number of recent high-profile class action cases in the news related to allegations of so-called "anti-poaching" agreements. The plaintiffs in these cases allege that competing employers agreed not to participate in bidding wars for new hires and/or hire each other’s employees using certain methods. Is this an employment issue or an antitrust one?

Professor Buchinsky: In many ways, it is a bit of both. In some of the recent cases, plaintiffs have alleged that competing employers entered into agreements to refrain from recruiting one another's personnel through certain recruiting channels. While the key economic topics in these cases are familiar ones in employment litigation—labor market competition and the determination of wages—the plaintiffs allege that these agreements violated Section I of the Sherman Act, an antitrust statute, claiming that such actions suppressed competition for workers.

Last year, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued joint guidance directed at human resource professionals, noting that that certain agreements between competitors in an employment market to fix wages or to not poach employees from one another constitute per se violations of antitrust law. The DOJ also recently announced its intention to prosecute such violations criminally. I would expect that this recent guidance will likely lead to an increase of anti-poaching cases in the future, both civil and criminal.  

Q: Many of the anti-poaching class actions allege that employers have worked together to limit mobility of employees which, in turn, suppressed their wages. Based on your research quantifying the impact of employee inter-firm mobility on wages, what have you learned about the factors that impact wages when employees stay at a firm as compared to when employees change firms?

Professor Buchinsky: I co-authored a study that examined the returns to seniority in the US workforce by looking at how moving from one firm to another affected compensation throughout a worker's entire career path. A number of the study’s findings could provide meaningful insights in anti-poaching class actions. In particular, our study found that wage growth is achieved through a combination of wage increases within the firm and wage increases associated by switching to a new firm. Importantly, the returns to seniority among US workers we found in our study—and the associated wage growth—are much larger than those previously found in the literature, largely because we better account for possible unobserved differences in worker characteristics. A key element in these types of studies is the self-selection process that individuals go through when deciding whether or not they want to move to new jobs. Even those who choose to stay at a particular firm can experience wage increases within that firm, because they are able to leverage an outside option of moving to better-paying jobs that may be available to them. Anti-poaching agreements between certain firms have the potential to limit workers' outside options, although the impact on his or her compensation will depend on a myriad of industry- and worker-specific factors.

Q: Over the past few years, anti-poaching agreements between franchisees of many fast food franchise systems have been drawing increased attention from litigants and policymakers. Based on your research, how would you expect the potential impact of these agreements on low-skill, low-wage workers to differ from their impact on more highly skilled workers?

My research shows that wage growth patterns and returns to experience and seniority vary across education levels, experience, and firm tenure, among other factors. Of particular importance to this question, my research has found that wage increases within a firm are more important for the wage growth of high school drop-outs (because of their lower returns to experience), while moving from one firm to another is a more important source of wage growth for college graduates. These findings are robust with respect to alternative assumptions about the model and different study samples, dynamics that can be particularly important in the context of class certification. Variation in mobility and wage growth patterns across education and skill levels are important factors to consider when analyzing the potential impact of anti-poaching agreements on workers in these franchise systems. ■