The Department of Justice has claimed its first victory in attacking “no-poach” agreements after a Nevada staffing company pled guilty and was sentenced to pay $134,000. The case arose out of a concerted effort by the Federal Trade Commission and DOJ, first announced in 2016, to target companies who enter into agreements with competitors to fix wages or not hire each other’s workers. The DOJ has taken the position that “no-poach” agreements constitute criminal conspiracies in restraint of trade, in violation of the Sherman Anti-Trust Act.
In the Nevada case, two nurse staffing companies providing nurses to a school district allegedly agreed to allocate nurse employees by not recruiting or hiring each other’s nurses assigned to that school district. They further allegedly agreed to refrain from raising the wages of those nurses. As evidence of the conspiracy, the DOJ cited emails documenting the companies’ agreement:
- The Branch Manager of the indicted company sent an email to Company A (not indicted) stating: “per our conversation, we will not recruit any of your active [school district] nurses.”
- Company A employee responded with the following: “[a]greed on our end as well. I am glad we can work together through this and assure that we will not let the field employees run our business moving forward.”
- In an email discussing refusing to negotiate further wage increases, the Branch Manager also stated “[i]f anyone threatens us for more money, we will tell them to kick rocks!”
The staffing company sought dismissal of the indictment on a number of grounds. Factually, it highlighted that the company allegedly involved in the conspiracy (which the indicted company had acquired) ceased operations within a year of the alleged agreement, and that it no longer employed the offending Branch Manager. Legally, the company argued that the DOJ was pursuing a novel and unsupported theory, because courts have not previously found “no-poach” agreements to be per se violations of the Sherman Act. Nevertheless, the court denied the company’s motion, leading to its guilty plea.
Though the case contains some unique facts, it is telling for several reasons. First, it demonstrates the DOJ’s increasing focus on prosecuting “no-poach” agreements. The DOJ pursued this case even though the offending company no longer existed and the offending Branch Manager was no longer employed. Second, the criminal fine levied ($62,000) was higher than the federal guidelines would customarily recommend. Fines issued in these circumstances are based upon the volume of commerce (amount of business affected). While federal guidelines recommend a 20% ratio, modified by a company’s culpability, here the ratio was approximately 28%. The fine could significantly increase for a larger company. Third, all involved parties may face indictment, whether actively participating in the conduct or not. While the Branch Manager may have been the primary offending party, the DOJ prosecuted both him and his employer.
Companies should always carefully consider any agreements – formal or informal – they might enter with competitors, so as to avoid drawing antitrust scrutiny from the DOJ. Similar to the government’s recent actions limiting non-compete restrictions, its recent focus on “no-poach” agreements reflects its attempt to shift power from the employer to the employee. If you have questions about this or other Staffing, Labor and Employment, or Litigation issues, please contact Andrew Cleves, Chris Koehler, or a member of the Frantz Ward Staffing, Labor and Employment, or Litigation Practice Groups.