Hartford Business Journal

30 Hartford Business Journal | April 5, 2021 | HartfordBusiness.com EDITOR'S TAKE With another corporate HQ under threat, CT must focus on a competitive biz environment G reater Hartford in recent weeks has had to hold its breath as another one of its largest, publicly-traded companies is targeted for acquisition. For now, property and casualty insurer The Hartford has shrugged off overtures from global insurer Chubb Ltd., though the courtship may only be in its early stages. Regardless, corporate consolidation is a trend that's here to stay and we may see a lot more deals in myriad industries as we emerge from the pandemic. The region has already lost two major corporate headquarters in the last few years: Aetna was purchased by pharmacy giant CVS Health, which is based in Rhode Island, while Farmington- based United Technologies and Raytheon Corp. merged creating Raytheon Technologies, now based outside Boston. Such consolidation tends to result in job losses, especially in states that lose a headquarters. The potential takeover of The Hartford is even more discomforting as the city tries to move past the pandemic and bring workers back downtown. As a region and state we could see this as a doom-and-gloom scenario, but in reality future job growth in Connecticut is not going to be driven by large, publicly-traded companies. It's the small and midsize firms with strong Connecticut roots that add 10 jobs here, and 20 jobs there that will ultimately move the dial in the state's growth long term. And there are plenty of success stories out there despite the tough economic conditions of the last 12 months. For example, Farmington-based WellSpark, which offers corporate wellness programs, recently announced plans to add 287 jobs over the next seven years. In this issue we profiled Windsor-based Infinity Fuel & Hydrogen, which quietly doubled its workforce during the pandemic and may double or even triple it again in the next few years. Big corporates like The Hartford are important cogs in the region's economy but it's unlikely they will be major generators of new jobs locally. So while corporate M&A activity leaves us all on edge, it's not something we as a region can control. What we can focus on is creating a better business environment that keeps growing small and midsize companies here in Connecticut. And that effort starts at the state Capitol, where some Democratic lawmakers are once again considering bills that would make the state less competitive. Whether it's a new property tax on higher-priced homes, calls to increase taxes on the wealthy, new employer mandates or a state- run health insurance plan, there is no shortage of proposals that have the business community concerned. To his credit, Gov. Ned Lamont recently told a virtual Connecticut Business & Industry Association audience he has no interest in raising taxes, particularly as the state is gearing up to receive billions of dollars in federal stimulus money from the American Rescue Plan. He's also raised skepticism about a public insurance option. The state's red-hot residential real estate market over the last year shows that Connecticut is an attractive place to live; right now we must do everything we can to press our advantages — including a highly-educated workforce, good schools and high quality of life — and make Connecticut a strong destination for both businesses and individuals. Whether we realize it or not, the world and economy have changed dramatically over the last 12 months and there will be tremendous competition between states to attract jobs and people coming out of the pandemic. The Lamont administration has decided (smartly, in my opinion) to reduce its reliance on economic incentives to support job growth, which means the state will have to stand more on its own merits when it comes to attracting private-sector investment. Lawmakers must keep that in mind with every policy proposal they bring to the table. If Connecticut can improve its business climate we won't have to worry as much about the loss of another corporate headquarters. Or, better yet, we will give any acquiring company not based in the state added incentive to want to keep jobs in Connecticut. 'No poach' indictment serves as reminder for competitors By Michael Kurs and James T. Shearin For the first time, the Justice Department has filed criminal charges related to "no poach" agreements. These agreements, made between two or more competitors to neither recruit or hire others' employees, may well be a violation of antitrust laws. If this sounds like these agreements would be an issue for big tech companies, you're not wrong. "No poach" agreements (also known as "employee allocation" or "non-solicitation" agreements) were in the news in 2015 regarding a class action lawsuit against a group of tech giants including Apple, Google and Intel. The suit claimed that "no poach" agreements were used to suppress employee pay and was reportedly settled for $435 million in 2015. The latest indictment, filed in January in the United States District Court for the Northern District of Texas, Dallas Division, alleges that Surgical Care Affiliates LLC (SCA) and related companies engaged in "no poach" agreements to stifle competition for senior-level healthcare personnel. The case, which alleges wrongdoing by both companies and individuals, provides an example that C-suite and HR executives alike would be wise to note. What not to do The Justice Department indictment cites many emails sent and received by SCA executives and employees over a seven-year period. "I had a conversation with [Individual 1] re: people and we reached agreement that we would not approach each other's proactively," reads one email. A recruiter is quoted as writing, "Please do not schedule a call with [candidate] … . We cannot reach out to SCA folks. Take any SCA folks off the list." A company identified in the indictment as "Company A" referred to a "verbal agreement with SCA not to poach their folks … ." An HR employee from Company A also remarked that although a specific candidate "look[ed] great" she "can't poach her." The indictment essentially provides a script for the types of behavior that could expose a company and its leaders to criminal prosecutions, fines and jail time. Different from noncompete agreements With certain exceptions and limitations, noncompete agreements are enforceable in Connecticut. However, "no poach" agreements are different from noncompete agreements. The latter bars an employee from joining a competitor or going into business for themself with a clearly defined timeframe, geography and industry. Noncompetes are "bottom up" with employees often entering into them willingly when they take a job. "No poach" agreements are "top down," so to speak. Competitors agree not to so much as interview one another's employees, meaning employees have no ability to move within the market. Individuals are also able to challenge noncompetes in court if they feel the clause is being applied unfairly. A proactive approach to compliance While it would seem like not entering into "no poach" agreements would be simple enough, it's often not so cut-and-dry. While SCA openly used the word "poach" in their communications, your executives and HR team may not necessarily recognize when they are at risk for antitrust violations. The best solution for individuals, companies, whether large or small, for- profit and nonprofit organizations, is a proactive compliance program. In a 2020 update to its guidance, the Justice Department plainly states that "the adequacy and effectiveness of the corporation's compliance program at the time of the offense, as well as at the time of the charging decision," will be a factor regarding potential criminal charges. In addition, compliance programs help organizations avoid other antitrust pitfalls such as price fixing, bid rigging and market allocation. This is certainly one case where, as they say, an ounce of prevention is worth a pound of cure. James T. Shearin is a litigation attorney and chairman of law firm Pullman & Comley. Michael Kurs is an attorney in the healthcare and professional liability practices at Pullman & Comley. Opinion & Commentary Greg Bordonaro Michael Kurs James T. Shearin EXPERTS CORNER "It's the small and midsize firms with strong Connecticut roots that add 10 jobs here, and 20 jobs there that will ultimately move the dial in the state's growth long term."

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