A Ruling and Order issued on April 28, 2023 by the US District Court for the District of Connecticut in United States v. Patel, et al. ran the government’s losing streak to four failed trials seeking to criminally prosecute alleged wage-fixing and no-poach agreements.
To review, in 2016 the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) issued Antitrust Guidance for Human Resources Professionals that warned of potential criminal prosecutions for so-called “naked” no-poach agreements, ie , agreements among competing businesses to restrict hiring or compensation of employees, untethered to any legitimate collaborative relationship.
Since 2020, the DOJ has taken four such criminal cases to trial, without success. In the latest loss in United States v. Patel, et al., the DOJ in December 2021 had charged a former Pratt & Whitney manager and five executives of Pratt & Whitney’s engineering subcontractors with crimes alleging that they conspired to limit competition in the hiring of engineers and other skilled workers in the aerospace industry in an effort to suppress compensation. The case proceeded to trial in April 2023. At the conclusion of the DOJ’s case, the defendants jointly filed a motion for judgment of acquittal. The Court granted the motion, finding that there was no “blanket agreement not to hire” among the defendants, but rather that the alleged agreement had so many exceptions that it could not be said to effectively allocate the labor market of engineers from the supplier companies working on Pratt & Whitney projects. In granting the judgment of acquisition, the Court held that no reasonable jury could conclude that there was a cessation of meaningful competition in the market.
The DOJ’s three earlier losses in these no-poach prosecutions at least had made it to jury verdicts. In March 2023, a Maine federal jury acquired four operators of home health agencies of conspiring to fix caretakers’ wages. In April 2022, a Colorado federal jury acquired DaVita Inc. and its former CEO on all counts of conspiring with three other companies to suppress competition in the market for employees. Also in April 2022, a Texas federal jury found the former owner and former clinical director of a physical therapist staffing company not guilty of orchestrating a wage-fixing scheme (but did find the owner guilty of obstruction of the government’s investigation). The only convictions secured by the DOJ on these no-poach charges came by way of guilty pleas, one by a manager and the other by a health care staffing company, both accused of scheming to suppress wages of nurses working in Las Vegas schools.
Despite the lack of success in its no-poach prosecutions, the DOJ continues to take an aggressive posture, so 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 about their obligations and the potential risk of criminal liability, both to the company and the employees personally if they do not comply with the law.
Attorneys in Epstein Becker Green’s Trade Secret & Employee Mobility, White Collar Defense and Internal Investigations, and Antitrust practice groups are well equipped to advise companies, train employees, and provide representation in civil or criminal investigations and litigation involving alleged no-poach agreements.