The departure of key employees can be quite damaging to a business’ bottom line. It is not surprising that businesses go to great lengths and spend significant sums of money to keep those employees. Sometimes, those lengths take the form of additional pay and benefits to the key employee. In other instances, the measures take the form of restrictive covenants that prevent the key employee from accepting a similar role in a particular geographic location. And sometimes, employers go too far.
In January, the Department of Justice (“DOJ”) indicted Surgical Care Affiliates, LLC and its successor SCAI Holdings, LLC (“SCA”) on antitrust conspiracy charges because they entered into a so-called “no-poach” agreement with a competing employer. According to the two-count indictment, believed to be the first of its kind, executives of SCA met with two of its competitors and agreed not to solicit each other’s senior-level employees. E-mail correspondence amongst SCA employees and between SCA employees and third-party recruiters described employees working for those competitors as “off limits.” Other unidentified companies and individuals, deemed uncharged co-conspirators in the indictment, knew of and participated in conduct that the DOJ alleged constitutes a per se violation of the Sherman Antitrust Act.
While few companies that make no-poach pacts will face criminal prosecution, significant repercussions await an employer who continues to use them. In December, former President Trump signed into law the Criminal Antitrust Anti-Retaliation Act (“CAARA”), amending the Antitrust Criminal Penalty Enhancement and Reform Act. CAARA protects employees, agents, and other “covered individuals” who report or cause to be reported criminal antitrust violations from adverse action by an employer. Much like other anti-retaliation statutes, CAARA offers protection as long as the reporter “reasonably believes” a criminal antitrust violation occurred.
The SCA indictment gives employees and others plenty of “reasonable belief” that no-poach practices violate criminal antitrust laws. By continuing to enter into these agreements, employers increase the likelihood that the company name will end up on the latter half of the “v.” in a workplace retaliation suit. The cost to a business to fund its own defense will be significant in and of itself. Add to that CAARA’s plaintiff-friendly remedial structure, including the recoverability of damages, attorney’s fees and costs, and it becomes clear why employers would be wise to put the use of no-poach agreements behind them.
