“No-poach” or “no-hire” agreements involve employers agreeing not to steal each other’s employees, and have long been a feature of industries in which skilled talent is in short supply. These agreements, however, can violate the antitrust laws by restricting employee movement and limiting compensation.  In public comments in January, incoming Assistant Attorney General for the Antitrust Division of the Department of Justice (DOJ), Makan Delrahim, reported his surprise when he learned of the number of no-poaching agreement investigations underway at the DOJ and indicated that prosecutions would be publicly announced soon.

In addition, earlier this month, a North Carolina federal district court judge certified a class of University of North Carolina (UNC) School of Medicine and Duke University School of Medicine clinical faculty in an antitrust suit alleging no-hire agreements between the two universities.1 These developments serve as important reminders that no-hire or no-poach agreements are under increasing scrutiny, not only from the DOJ but also from private litigants, particularly in the healthcare field.

UNC/Duke Case Background

As we reported in our September 2015 Health Update article, plaintiff Danielle Seaman, an assistant professor of radiology at Duke, was allegedly told via email by UNC’s head of radiology that she was rejected from a position at UNC because the Duke and UNC deans had agreed not to permit faculty to make lateral moves between the two universities. Seaman sued the universities, alleging that they had conspired not to hire each other’s medical faculty in an effort to suppress competition and wages for faculty, physicians, nurses and skilled medical staff.

UNC settled the case in August 2017, agreeing not to enter into or enforce any unlawful no-hire agreements or similar restraints on competition. The case continues against Duke. On February 1, 2018, Judge Catherine Eagles certified a class of all persons employed from January 1, 2012, to the present as a faculty member with an academic appointment at the Duke or University of North Carolina Schools of Medicine. Although the court denied extending the class to nonfaculty physicians, nurses and skilled medical staff on manageability grounds, the success of this partial class certification is likely to inspire plaintiffs’ attorneys to continue pursuing these types of cases.

Increasing DOJ Enforcement and Criminal Prosecutions Expected

Since about 2010, when the DOJ announced a settlement requiring Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar to cease entering into nonsolicitation agreements for employees, the DOJ has increasingly stepped up its enforcement against no-poach agreements. The DOJ’s suit against Adobe et al. was followed by private class actions against the tech companies, culminating in a $415 million settlement against Apple, Google, Intel and Adobe.2

As we reported in our article in the October 2016 issue of Health Update, the DOJ and the Federal Trade Commission issued Antitrust Guidance for Human Resources Professionals (HR Guidance) focusing on wage-fixing and no-poaching agreements.3

While the HR Guidance noted that “the DOJ intended to proceed criminally against naked wage-fixing or no-poaching agreements” to date, the DOJ has not announced any criminal actions. On January 19, 2018, however, Delrahim announced that the DOJ is currently working on criminal no-poach agreement cases and will be announcing indictments in the coming months. Delrahim said that he has “been shocked about how many of these there are.” Of course, once the government brings criminal charges, private class actions are sure to follow.

Takeaways

The recent class certification decision and DOJ announcement make it clear that, whether formal or informal, no-poach agreements are currently in the spotlight. The agreements are subject to both civil and criminal liability, through both government enforcement and private actions and can carry significant penalties and repercussions. Hospitals, universities and other healthcare providers are on notice that agreements with competitors about employees are off-limits. Should any such arrangements come to light, companies may want to consider utilizing the DOJ’s leniency guidelines and seeking amnesty or penalty reductions for early reporting and cooperation.