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No-Poach Guilty Plea Flags How to Mitigate Risks

Sept. 22, 2022, 8:00 AM

On Sept. 1, a health-care staffing company notified a federal court in Nevada that it intended to plead guilty to antitrust violations. It was accused of conspiring with a competitor to not raise wages of certain nurses or recruit or hire nurses away from each other.

This case flags the Justice Department’s increasing enforcement against illegal labor market agreements.
Early detection of these types of agreements can provide employers, employees, and their business partners with options and potentially reduce or eliminate criminal exposure.

When looking at the DOJ’s recent enforcement actions, there are a few takeaways that companies can use to help mitigate antitrust risk.

No-Poach & Wage-Fixing Enforcement

Criminal antitrust enforcement of labor market collusion laws has increased dramatically in recent years.

In 2016, the DOJ announced a shift in policy to criminally prosecute employers and individuals that enter into naked wage-fixing or no-poach agreements with other employers.

In 2021, President Joe Biden issued an executive order that, among other things, encouraged the DOJ and Federal Trade Commission to broaden and strengthen enforcement against “wage collusion” and other unlawful labor market agreements.

Since 2021, the DOJ has brought criminal indictments in several labor market collusion cases. All of these cases survived motions to dismiss but ultimately ended in acquittals until this most recent case, marking the DOJ’s first-ever criminal labor market victory.

Early Detection Is Vital

Finding potentially problematic labor market agreements early provides more options for employers and reduces exposure to charges.

Criminal violations of antitrust laws can result in serious consequences, including fines and prison time. In addition, third-party business partners, such as staffing, recruiting, and organizational consulting firms, may also be implicated.

Antitrust violations can be prevented by educating key employees—management, human resources, and legal personnel—and external business partners about specific issues that can create risks.

This includes knowing how to identify violations and how business objectives can be accomplished without incurring potential criminal antitrust liability. Creating and implementing internal antitrust compliance policies will mitigate legal and business risks.

Also, if a potentially unlawful labor market agreement is discovered, a DOJ leniency program allows the first-reporting company or individual that confesses participation in the illegal agreement and fully cooperates with the DOJ to avoid criminal conviction and resulting fines and incarceration.

How to Mitigate Antitrust Risk

Ensure Executive Awareness

Because criminal enforcement of unlawful labor market agreements is still a relatively recent development, many executives may be unaware that entering into a verbal contract with a competing employer could result in massive criminal financial penalties, or even land them in prison.

Providing targeted, salient, easy-to-implement antitrust compliance advice for executives and anyone involved in hiring decisions is the most effective, lowest-cost way to limit the risk of entering into an unlawful labor market agreement.

Train HR to Identify Red Flags

HR personnel typically do not themselves enter into unlawful labor market agreements. More commonly, they receive information or instructions from other employees or business partners indicating a potential arrangement or understanding with another employer.

HR partners—in-house HR employees and external partners—should be trained on how to identify potential red flags. This includes instructions not to recruit or hire from a particular company, compensation decisions based on agreements with other employers, and sharing or receiving confidential compensation or hiring information about another company.

It may also be helpful to distribute the DOJ and FTC Antitrust Red Flags for Employment Practices quick reference card to HR personnel.

Know What Sensitive Information Can Be Shared

Sharing information about compensation and hiring is not unlawful, but must be done with caution.

It is also helpful for HR employees to attend conferences to learn industry best practices, and it may even be necessary to share this information, such as when evaluating a merger, acquisition, or joint venture proposal.

Criminal prosecution of an antitrust labor market violation requires an agreement between two or more individuals or companies not to compete in their recruitment or retention of employees.

But an agreement need not be formal or written to violate the antitrust laws—an informal agreement or other tacit or implied understanding concerning employee compensation or recruitment is equally prohibited.

While the DOJ’s indictment in the most recent case seems to indicate clear communications reflecting no-poach and wage-fixing agreements, antitrust violations may be inferred from information exchanges between companies.

Thus, while sharing competitively sensitive information—such as compensation and benefits information or recruitment strategies—may not alone warrant a criminal conviction, the possibility of an expensive and disruptive criminal investigation or prosecution should give employers pause.

Exchanging competitively sensitive hiring or compensation information should be done in a manner that incorporates the advice of antitrust counsel.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Author Information

Lauren Norris Donahue is a partner in K&L Gates’ Chicago office where she focuses her practice on domestic and international internal investigations, corporate criminal defense, complex commercial litigation, and antitrust counseling. She is a member of the antitrust, competition, and trade regulation and investigations, enforcement, and white collar practice groups.

Derek Sutton is an associate in the firm’s Raleigh, N.C., office and a member of the antitrust, competition, and trade regulation practice group.