Is your real estate brokerage violating antitrust law? If a broker has an agreement with another brokerage to not approach sales agents employed by the other’s brokerage, they may be on shaky ground.
Several Silicon Valley tech companies, including Google and Apple, recently settled an anti-poaching lawsuit, paying out $415 million to the employees they wronged. The tech companies’ error? The chief officers colluded with each other to not hire one another’s employees. Without competing offers, their employees’ wage growth was limited.
These actions are unlawful under the Sherman Antitrust Act, which prohibits a conspiracy to restrict trade or commerce. Reading between the lines of the Antitrust Act, companies which conspire to keep their employees’ wages low are violating antitrust law. [15 U.S. Code §1]
Is a prohibition on agent poaching a violation of antitrust law, too?
The answer is not concrete, and there is no case precedent to answer the question. But the tech companies’ behavior certainly bears similarities to the way brokers approach sales agents as potential employees. The “polite” thing for a broker to do is to limit their employment offers to sales agents not already attached to a broker. Otherwise, it’s considered poaching, a Baroque word literally meaning “to trespass upon another’s land to steal game.” However archaic the term, the thought persists that other people’s employees are off limits, to the detriment of the employee’s livelihood.
Brokers are split on the issue
In a recent first tuesday poll, two-thirds of respondents said recruiting another broker’s sales agents isn’t an ethical issue. However, one-third of respondents said actively recruiting agents employed at another brokerage is unethical.
To those who think it’s unethical to recruit employees of other brokers: is it not more of an ethical issue to stifle benefits and incomes of the collective sales agent population? That’s what happens when agents aren’t able to move freely under different brokers. Sure, loyalty is a desirable attribute in an employee, but if another broker is offering a better commission split and more office benefits, can you really blame the sales agent for wanting the opportunity for more?
Competition can also be good for brokers. Offering better splits and benefits for agents helps brokers attract the best talent, which ultimately translates to more deals closed. If a broker doesn’t offer at least the same benefits and fee split that their competitors offer, they’re likely to lose their best performing agents and get stuck with the duds.
Recruiting methods matter
Therefore, agent poaching can be great for both agents and brokers. But a broker’s recruiting methods are important, as there is a dark side to poaching.
Some brokers opt for quantity over quality when it comes to recruiting. Most licensees receive a stock letter soliciting them to work for a random broker they’ve never heard of at one point or another. Brokers hire recruiting companies to canvas all licensees in their area, in the hopes of snagging a few agents to add to their ranks. This recruiting strategy can provide a short-term boost to a brokerage’s earnings, but will rarely pay off with sustainable growth.
A broker is better off focusing on recruiting agents with high potential or a proven track record; quality over quantity. Then, the broker approaches the most talented sales agent with an offer to increase their earnings, and that of the broker’s. Having a recruiting plan in place also ensures the best return on the broker’s time and effort.
Likewise, agents — especially inexperienced ones most likely to consider these out-of-the-blue offers — ought to prefer brokers willing to invest the effort in building their skills and network. New agents may prefer more training opportunities to a better fee split.
Brokers who use recruiting companies are ready to harvest the few home sales the new agent has in their network of family and friends and dump them when they stop bringing in sales. Not good for business.