It is no secret that the Department of Justice (DOJ) has been largely unsuccessful in the criminal no poach cases it has brought to trial to date. Its most public loss came with the acquittals earlier this year of DaVita, a dialysis company, and certain of its executives in the District of Colorado. DOJ also lost at trial in another high-profile case in the Eastern District of Texas involving a physical therapy staffing company (although it secured a conviction against a company executive for obstruction of justice). But DOJ has pressed on, claiming victories at the motion to dismiss stage. Indeed, following its recent trial losses, Assistant Attorney General Jonathan Kanter, who leads the DOJ’s antitrust division, had this to say:

We’re going to continue to bring the cases – we’re not backing down. . . .  In terms of establishing a viable precedent, the cases will most often be cited in our favor going forward because courts agree that antitrust harms that affect workers are actionable antitrust harms.

DOJ now has a conviction to point to, albeit in the form of a guilty plea by a healthcare staffing firm in Las Vegas.

First, a brief background on no poach law. No poach agreements came to the forefront around 2010 in what were called the “high-tech cases.” There, certain companies in Silicon Valley and Hollywood entered into agreements not to cold call or otherwise recruit each other’s employees. DOJ brought civil actions against those companies, alleging that they had engaged in naked horizontal restraints that constituted per se violations of the Sherman Act, and ultimately obtained consent decrees that enjoined the defendants from “attempting to enter into, entering into, maintaining or enforcing any agreement with any other person to in any way refrain from, requesting that any person in any way refrain from, or pressuring any person in any way to refrain from soliciting, cold calling, recruiting, or otherwise competing for employees of the other person.” Final Judgment, U.S. v. Adobe et al., Case 1:10-cv-01629-RBW (D.D.C. 2010). Later class actions arising out of the same conduct were settled to the tune of $435 million, with the Court issuing the following ruling at the motion to dismiss stage:

Plaintiffs have asserted that their salary and mobility were suppressed by Defendants’ agreements not to cold call, and that the alleged agreements were entered into to suppress competition for skilled labor. . . . Plaintiffs have further alleged that Defendants’ attempts to suppress competition had the intended effect of fixing the compensation of Plaintiffs at artificially low levels. . . . Thus, Plaintiffs have adequately pled antitrust injury.

In re High-Tech Employee Antitrust Lit., 856 F.Supp.2d 1103, 1123 (N.D. Cal. 2012). But these were all civil actions.  Other civil actions followed over the ensuing decade in various industries, including university healthcare systems, franchise systems, railroad, aerospace, and the staffing industry.

In October 2016, DOJ and the Federal Trade Commission (FTC) issued “Antitrust Guidance for Human Resources Professionals.” There, for the first time, DOJ made clear that so-called “naked” no poach agreements would be prosecuted criminally. ^[1] This piqued the interest of some executives and in-house counsel, but what really caught their attention was when DOJ started bringing criminal cases. A few are ongoing and have survived motions to dismiss, but in the cases that have gone to trial, the defendants have all secured acquittals on the no poach claims.

Although DOJ has not yet won a guilty verdict at trial, it can claim a victory against VDA OC LLC (formerly Advantage On Call LLC), a healthcare staffing firm, which pled guilty in federal court in Las Vegas to conspiring with an unnamed competitor not to hire nurses from each other and not to raise the wages of nurses working in the Clark County School District. The court sentenced VDA to pay a criminal fine of $62,000 and restitution of $72,000. AAG Kanter said in response to the plea that: “Today’s guilty plea demonstrates our commitment to ensuring that workers receive competitive wages and a fair chance to pursue better work and that criminals who conspire to deprive them of those rights are held accountable.”

Demonstrating just how fraught these cases can be, and how low-level employees can place their employers (and themselves) in danger of criminal prosecution, VDA said in a statement about the plea that the agreement at issue “involved a single telephone conversation and one email” between one of its employees and an employee of a competitors, according to Law360 and Bloomberg Law. Interestingly, VDA also said that the “conversation and email, both occurred on the same day six years ago, October 21, 2016, exactly one day after the DOJ issued its Antitrust Guidance for HR Professionals.” A single call and a single email led to criminal liability.

With DOJ’s current aggressive posture toward no poach agreements, it is critical that employers be aware of the risks, have policies in place that prohibit entering into these types of agreements, and train all levels of employees, from the C-Suite on down to recruiters, about their obligations and the potential criminal risk of criminal liability to the company—and to the employees personally—if they do not abide by the law, even if just a single conversation or email, formal or informal, with no malintent. The fact that they, too, can face potential criminal liability typically will get employees to pay attention and think twice before having a conversation with their counterpart at a competitor.

FOOTNOTES

^[1] Naked no-poach agreements are those that are untethered to any legitimate collaborative relationship. Agreements between competitors in the labor market that are ancillary to a legitimate collaboration (such as a joint ventures, staffing arrangements, etc.), and are narrowly tailored to the employees involved in the collaboration, are legal. Many no poach cases ultimately turn on the issue of ancillarity.