Chamber of Commerce Questions the Criminality of Employee No-Poach Agreements

Ballard Spahr LLP

Ballard Spahr LLP

Whether employee no-poach agreements are illegal per se is being tested in a criminal case, U.S. v. Surgical Care Affiliates LLC et al., drawing the attention of many interested parties, including the United States Chamber of Commerce (Chamber).

In 2016, the Federal Trade Commission (FTC) and the Department of Justice, Antitrust Division (DOJ or the Division) released joint guidance signaling that agreements between competing employers that “limit or fix the terms of employment” for prospective employees may violate antitrust laws.  The guidance went on to note that wage fixing and agreements between competitors not to poach each other’s employees are “per se illegal under antitrust laws.”  Under the Antitrust Division’s own policy, only per se violations of the Sherman Antitrust Act are prosecuted criminally.

In an indictment brought earlier this year, DOJ charged Defendant Surgical Care Affiliates (SCA) with criminal antitrust violations for entering into agreements with competing businesses not to poach the other’s senior level executives.  In its motion to dismiss, SCA highlighted that the relevant agreements were entered into over four years before the 2016 guidance was released, so it would be unfair to view that guidance as notice of the allegedly wrongful nature of the conduct at issue.

On April 2, 2021, the Chamber filed a proposed amicus brief supporting SCA’s motion to dismiss the indictment.  In its brief, the Chamber argued that, by declaring a new per se criminal offense, DOJ has usurped the decision-making authority vested in Congress and the courts. Additionally, the Chamber asserted that DOJ’s prosecution falls “short of the fair notice that due process requires” by criminally prosecuting a practice not firmly established by courts as per se illegal at the time the conduct occurred.

The DOJ is once again signaling its desire to increase antitrust enforcement efforts of no-poach agreements and similar measures by employers to retain talent.  Review our previous coverage of antitrust enforcement actions here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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