On April 28, 2023, a federal judge dismissed the third no-poach criminal case the U.S. Department of Justice (DOJ) had taken to trial. The DOJ indicted six engineering staffing company executives in December 2021, accusing them of restricting the hiring and recruitment of engineers in violation of the Sherman Act. Although the judge had denied a motion to dismiss the charges last year, the judge found that the evidence presented by prosecutors at trial was insufficient to show market allocation among the executives in the engineer labor market. The dismissal is a blow to the agency’s ongoing efforts to criminally prosecute alleged agreements to fix wages and restrict hiring.
As we previously reported, the DOJ and the U.S. Federal Trade Commission (FTC) updated their Antitrust Guidance for Human Resources Employees in 2016 to make clear that the DOJ would now criminally prosecute antitrust labor violations, including no-poach and wage-fixing agreements. Since then, judges have denied motions to dismiss on the grounds that no-poach agreements may be horizontal agreements to allocate markets and, as such, potential per se violations of the antitrust laws.[1] Nevertheless, the DOJ has largely failed to identify and successfully prosecute these types of cases. The only DOJ no-poach victory thus far resulted from a guilty plea from a Nevada health care staffing company that had colluded with a competitor to allocate and fix the wages of employee nurses.
The first two criminal no-poach cases to go to trial highlight the difficulty in persuading a jury that certain conduct should be treated as per se illegal. The DOJ took the first of these cases to trial in April 2022 against DaVita, a kidney dialysis provider, and its former CEO, Kent Thiry. Although the defense admitted that DaVita had entered into certain agreements, they disputed that the agreements were intended to allocate the labor market, and they were acquitted on all counts. Just a year later, the DOJ attempted to convict owners and managers of home healthcare staffing agencies of alleged wage-fixing and no-poach agreements. Although the defendants denied entering into a definitive agreement, they admitted to engaging in negotiations. Ultimately, the jury acquitted the defendants, handing the DOJ its second criminal no-poach loss at trial.
As previewed above, in the most recent no-poach case to go to trial, United States v. Patel, the decision never made it to the jury. After hearing the evidence at trial, the judge observed that “not all no-poach agreements operate as market allocations,” even if no-poach agreements could be found to be per se illegal under certain circumstances. The hiring restrictions at issue in this case were constantly shifting, thus leading to a lack of meaningful allocation in the engineering labor market. Therefore, under Federal Rule of Criminal Procedure 29, the judge ruled no reasonable jury could convict any of the defendants based on the evidence presented by the DOJ.
The DOJ has one remaining criminal no-poach case against UnitedHealth Group’s Surgical Care Affiliates, which does not yet have a trial date. Regardless of the outcome, the DOJ’s recent losses may not deter them from bringing future criminal no-poach cases. DOJ Assistant Attorney General Jonathan Kanter has recently called the DOJ’s criminal labor cases “righteous” and has indicated the Division will continue to bring these types of cases when the facts and case law support them. However, the DOJ may need to be more selective in future cases to avoid a negative outcome. The DOJ will likely look for future no-poach cases in which the illegal agreements have created a clear and meaningful market allocation in order to avoid future acquittals.
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[1] See United States v. Patel, No. 3:21-cr-220-VAB (D. Conn.); United States v. Neeraj Jindal & John Rodgers, No. 4:20-cr-00358-ALM-KPJ (E.D. Tex.); United States v. Manahe, et al., No. 2:22-cr-00013 (D. Me.); United States v. DaVita Inc., No. 1:21-cr-00229-RBJ (D. Colo.).
