The United States Department of Justice (DOJ) is criminally prosecuting “no-poach” agreements between two or more employers that agree not to hire employees away from each other.
The DOJ’s first criminal prosecution of no-poach agreements led to a Texas federal grand jury indictment of Surgical Care Affiliates LLC (SCA), a unit of UnitedHealth Group, 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 is not a surprise. It has been the DOJ’s position for years that no-poach agreements are illegal. Future enforcement actions are expected since the present administration has signaled support for elimination of non-compete restrictions.
In at 2016 joint guidance by the DOJ and Federal Trade Commission (FTC), corporations and HR professionals were warned about the application of federal antitrust laws to hiring practices and non-poach agreements. The agencies advised the 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 when it 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 who are approached by competitors or collaborators about no-poach agreements or agreements to pay the same wages or salaries should immediately consult with legal counsel. Employers that have entered into agreements resembling a no-poach agreement should also consult with counsel to extricate themselves from such arrangements.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
Leave a Reply