DOJ Is On the Prowl to Prosecute “No-Poach” Agreements
Topics: Non-Compete and Trade Secrets
The Department of Justice (DOJ) finally fulfilled its long time promise to criminally prosecute “no-poach” agreements. A no-poach agreement is an agreement between two or more employers not to hire employees away from each other. The DOJ’s first criminal prosecution of no-poach agreements lead to Surgical Care Affiliates LLC (SCA), a unit of UnitedHealth Group, recent indictment by a federal grand jury in Texas for allegedly entering into agreements with two other healthcare companies to not poach each other’s senior-level employees. DOJ’s criminal pursuit of no-poach agreements should come as no surprise after years of making its position clear that it considers no-poach agreements to be illegal. Future enforcement actions are likely as the Biden administration has signaled support for non-compete restrictions.
For years, DOJ has “talked the talk,” but the SCA prosecution is a sign DOJ is “walking the walk.” In 2016, the DOJ and Federal Trade Commission (FTC) issued joint guidance warning corporations and HR professionals about the application of federal antitrust laws to hiring practices and non-poach agreements. The agencies warned that DOJ intended to “proceed criminally against naked-fixing or no-poaching agreements.” The DOJ reaffirmed its intention to criminally prosecute no-poach and at the end of 2020 commenced the first criminal prosecution targeting a staffing company for entering into wage-fixing agreements with its competitors. The former owner of the company could face up to 10 years in prison and a $1 million fine, in addition to potential FTC penalties and fines. A violation of the Sherman Act (anti-trust law) carries a maximum penalty of $100 million for corporations.
Employers Must Stay Alert
The DOJ is carrying out its promise to criminally prosecute no-poach agreements and we should not be surprised if this trend continues. Employers who are approached by competitors or collaborators about no-poach agreements or agreements to pay the same wages or salaries should be wary of such suggestions and immediately consult with experience counsel in this area. Any employer that has entered into any agreement resembling a no-poach agreement should consult with experienced counsel to extricate themselves from such arrangements. Agreements that unfairly impact the labor market or compensation may expose a business to criminal charges. Call your favorite CDF attorney to learn how to protect your business.
