The U.S. Department of Justice (DOJ) has been going after employers with so-called no-poach agreements but lost a recent high-profile case against DaVita Inc. involving a claim of such an agreement.
"Many of us in the defense bar have questioned the wisdom of the Antitrust Division's fixation on so-called labor market cases and resource expenditures to try to find and bring criminal no-poach cases," said Ann O'Brien, an attorney with BakerHostetler in Washington, D.C., and Philadelphia and a former assistant chief of the Competition & Advocacy Section and special counsel for Criminal Policy at the DOJ.
"What we are seeing in these trial defeats for the Antitrust Division is the culmination of a yearslong effort to find 'labor market cases' and push the boundaries of Section 1 of the Sherman Act to criminalize conduct that has never before been treated as per se criminal conduct. Juries have spoken, as have judges in their jury instructions, and they do not agree," she said.
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Company and CEO Found Not Guilty
A jury found DaVita not guilty of claims that it violated federal antitrust law by engaging in "no-poach" agreements with competitors—a blow for regulators seeking to boost enforcement of anti-competitive hiring practices. The company's former CEO, Kent Thiry, also was found not guilty of the same charges by a jury in the criminal trial in the U.S. District Court for the District of Colorado.
High-Stakes Case
The case was considered a high-stakes test of the government's ability to criminally prosecute entities for entering into agreements not to solicit another company's employees. DaVita faced a maximum penalty of a $100 million fine per count. Thiry faced a maximum penalty of 10 years in prison and a $1 million fine per count.
CEO's Statement
"The jury affirmed that this case should never have been brought," Thiry said in a statement. He thanked the jury for its "thoroughness in performing its solemn duty."
DOJ and FTC Guidance
In October 2016, the DOJ and Federal Trade Commission (FTC) jointly released their Antitrust Guidance for Human Resource Professionals. This guidance set the tone of the DOJ's and FTC's intent to target agreements that either fix salaries for employees or preclude companies from hiring each other's employees. The guidance highlighted that "[g]oing forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements," and that "the DOJ may … bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies."
No-Poach Statutes Garner Attention as Prosecution Increases
Legal experts say the Biden administration has stepped up action against no-poach agreements, which has put managers on alert. "We certainly expect it to continue to be an area of enforcement focus throughout the Biden administration, so I think there is as good a reason as the HR community has ever seen to stay close to these issues," said Nicholas Gaglio, an attorney at the New York office of Axinn, Veltrop & Harkrider, an antitrust law firm.
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