Employer Alert: DOJ’s Active Prosecution of Employer “No-Poach” Agreements Nets First Guilty Plea
The DOJ is cracking down on anticompetitive activities
In connection with the Biden administration’s aims at promoting competition throughout the economy, the Department of Justice (“DOJ”) has started taking a more active role in investigating, as well as prosecuting, employers’ alleged anticompetitive activities that, among other things, unfairly limit worker mobility.
The first healthcare staffing company to plead guilty
In furtherance of those efforts, the DOJ recently scored a significant victory when a Nevada healthcare staffing company pleaded guilty to entering into and engaging in illegal “no-poach“ hiring agreements with a competitor to allocate employee nurses and fix their wages, in violation of the Sherman Act. This is the DOJ‘s first win in the criminal enforcement of such labor antitrust violations.
More specifically, on October 27, 2022, and after the entry of a guilty plea, the U.S. District Court for the District of Nevada ordered VDA OC LLC (f/k/a Advantage On Call LLC) to pay a criminal fine of $62,000 and restitution of $72,000 to nurses affected by the agreement with its competitor, totaling $134,000 in the aggregate. The $62,000 fine was based on a volume of commerce – or the amount of business affected by the violation – of $218,000.
How the fine is calculated
United States Sentencing Guidelines recommend fines of 20% of total affected commerce, adjusted for culpability. The volume of commerce of $218,000 was derived from payroll records for the wages paid to affected nurses during the period of the conspiracy. The significant $72,000 restitution portion of the sentence is approximately one-third of the agreed-upon volume of commerce, and its magnitude may reduce the risk of follow-on private litigation by affected employees who recognize that the DOJ may instead pursue and prosecute on their behalf.
Competitor agreements under scrutiny
The DOJ and FTC in 2016 announced they would begin targeting companies‘ labor market agreements with competitors to allocate workers and fix wages as criminally liable, rather than just a violation of civil law. Three other criminal labor market antitrust cases brought by the DOJ are currently pending. This initial victory for the DOJ is expected to spur additional investigations into other potentially unlawful arrangements between competitor companies.
Any employers who currently are involved with, or contemplating entering into, any “no poach” agreements with competitors should view this development as a stern warning, and they are strongly advised to promptly discuss any such arrangements with their legal counsel.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.