From “no-poach” to non-competes: US antitrust enforcement in labor markets continues to evolve

The Covid-19 pandemic has caused upheaval across labor markets and resulted in what some have termed the “Great Resignation.” In the midst of these challenging labor market conditions, employers should be aware that the U.S. Department of Justice Antitrust Division (Antitrust Division) and Federal Trade Commission (FTC) continue to expand their scrutiny of agreements that restrict the solicitation, wages, or movement of employees. It is important to stay up to date on these developments and to understand what circumstances may separate common, lawful business practices from possible antitrust violations.

The Antitrust Division and FTC have long been interested in labor markets, but took a major step in October 2016 when they released the Antitrust Guidance for Human Resource Professionals (HR Guidance). The HR Guidance focused on “naked” wage-fixing and so-called "no-poach" agreements, which the agencies defined as agreements between companies "to refuse to solicit or hire [another] company's employees.”1 Among other policy statements related to labor market restrictions, the HR Guidance explained for the first time the Antitrust Division’s intent to prosecute these agreements as crimes, rather than civil violations.

It took several years, but the Antitrust Division lived up to its word, bringing criminal charges for wage fixing against the former owner of a physical therapy staffing agency in December 2020, and, one month later, indicting a company that owns and operates ambulatory surgical centers for allegedly entering agreements with two competitors not to solicit senior-level employees from one another.2 Then, in March 2021, the Antitrust Division filed an indictment in federal court in Nevada alleging that a healthcare staffing company and its former manager entered into an agreement with a competitor to allocate employee nurses and to fix their wages.3

While much of the enforcement has focused on criminal violations, at least one of the criminal prosecutions has led to civil class actions on behalf of allegedly injured employees, and both the Antitrust Division and the FTC have indicated that they continue to actively monitor developments on the labor and employment front and are seeking opportunities to expand their enforcement in these areas:

  • At recent speaking engagements in the fall of 2021, Richard A. Powers, then Acting Assistant Attorney General for the Antitrust Division emphasized that the Division is committed to “rooting out collusion in the labor markets”4 and “prosecuting naked conspiracies in labor markets because they rob workers of competitive wages, benefits, and other terms of employment.”5 Powers also mentioned that the Division is using its civil authority to examine the use of non-compete clauses consistent with President Biden’s Executive Order on Promoting Competition in the American Economy6, and expects to use its criminal authority to bring additional criminal no-poach cases soon.

  • During his 6 October 2021, confirmation hearing, Jonathan Kanter, the current Assistant Attorney General for the Antitrust Division following his Senate confirmation on 16 November 2021, also identified labor markets as an area of concern and stated that the Division would ensure that it has a "vigorous and comprehensive antitrust program that protects workers from anticompetitive actions."7

  • On 25 October 2021, the FTC announced a proposed consent order with DaVita, Inc., a large operator of kidney dialysis centers, in response to DaVita’s proposed acquisition of eighteen dialysis clinics from the University of Utah. The proposed consent order requires that DaVita divest three dialysis clinics in Provo, Utah and that DaVita receive prior approval from the FTC for any future merger activity in the state of Utah.8 This is the first time in over twenty-five years that the FTC has imposed prior approval requirements on a company for future transactions.9 The proposed order is also notable because DaVita is prohibited from “entering into or enforcing, directly or indirectly, any non-compete agreements with physicians” from the University of Utah.

  • In her remarks at the American Bar Association Antitrust Law Section Fall Forum on 9 November 2021, FTC Commissioner Rebecca Slaughter articulated her view that labor economics should be factored into merger reviews, and that the FTC has a responsibility to promote competition not only for consumers but also for workers.10

  • The DOJ and FTC are jointly hosting a virtual “Public Workshop on Promoting Competition in Labor Markets” 6-7 December 2021, which will include panels and speeches from a variety of lawyers, economists, academics, policy experts, and others on “efforts to promote competitive labor markets and worker mobility.”11

The multiple indictments over the past year and related civil class actions, combined with the recent public announcements from the leadership of DOJ’s Antitrust Division, make clear that the Division will continue to prosecute wage-fixing and agreements not to solicit or poach employees that are not connected to a legitimate business arrangement. And both US antitrust enforcement agencies appear to be expanding their efforts to examine and potentially limit or prohibit more common and widespread employment restrictions, such as non-compete agreements, which would mark a more aggressive turn in this area consistent with the Biden Administration’s position on labor market competition. These developments serve as a reminder, particularly in the current environment of challenging labor conditions, that employers should not forget about the potential antitrust implications of practices that may impact competition for employees and should consider consulting with experienced antitrust counsel about any possible concerns.

References
1 Department of Justice, Antitrust Division and Federal Trade Commission, “Antitrust Guidance For Human Resource Professionals,” (20 October 2016) available at https://www.justice.gov/atr/file/903511/download.
2 United States v. Neeraj Jindal and John Rodgers, No. 4:20-cr-358-ALM-KPJ (E.D. Tex. Dec. 9, 2020); United States v. Surgical Care Affiliates, LLC and SCAI Holdings, LLC, No. 3:21-cr-011-L (N.D. Tex. Jan. 5, 2021).
3 United States v. Ryan Hee and VDA OC, LLC, formerly ADVANTAGE ON CALL, LLC, No. 2:21-cr-00098-RFB-BNW (D. Nev. Mar. 26, 2021).
4 American Bar Association, 2021 Antitrust Fall Forum, “Antitrust Division Update” (9 November 2021).
5 Department of Justice, Office of Public Affairs, “Acting Assistant Attorney General Richard A. Powers of the Antitrust Division Delivers Remarks at Fordham's 48th Annual Conference on International Antitrust Law and Policy,” (1 October 2021) available at https://www.justice.gov/opa/speech/acting-assistant-attorney-general-richard-powers-antitrust-division-delivers-remarks.
6 Executive Order 14036, “Executive Order on Promoting Competition in the American Economy,” The White House, (9 July 2021) available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
7 United States. Cong. Senate. Committee on the Judiciary, “Nomination Hearing, ” 117th Cong. 1st sess.  Washington, D.C. (6 October 2021) available at https://www.judiciary.senate.gov/meetings/09/29/2021/nominations.
8 Federal Trade Commission, “FTC Imposes Strict Limits on DaVita, Inc.’s Future Mergers Following Proposed Acquisition of Utah Dialysis Clinics,” (Oct. 25, 2021) available at https://www.ftc.gov/news-events/press-releases/2021/10/ftc-imposes-strict-limits-davita-incs-future-mergers-following.
9 Federal Trade Commission, “FTC to Restrict Future Acquisitions for Firms that Pursue Anticompetitive Mergers,” (25 October 2021) available at https://www.ftc.gov/news-events/press-releases/2021/10/ftc-restrict-future-acquisitions-firms-pursue-anticompetitive.
10 American Bar Association, 2021 Antitrust Fall Forum, “In(augural) Visions for Antitrust), remarks of Rebecca Slaughter (9 November 2021).
11 Department of Justice, Office of Public Affairs, “Department of Justice Antitrust Division and Federal Trade Commission to Hold Workshop on Promoting Competition in Labor Markets,” (27 October 2021) available at https://www.justice.gov/opa/pr/department-justice-antitrust-division-and-federal-trade-commission-hold-workshop-promoting.

 

 

Authored by Benjamin Holt, Kathryn Hellings, Daniel Shulak, and Liam Phibbs.

 
Contacts
Benjamin Holt
Partner
Washington, D.C.
Katie Hellings
Partner
Washington, D.C.
Dan Shulak
Counsel
Washington, D.C.
Liam Phibbs
Associate
Washington, D.C.

 

This website is operated by Hogan Lovells Solutions Limited, whose registered office is at 21 Holborn Viaduct, London, United Kingdom, EC1A 2DY. Hogan Lovells Solutions Limited is a wholly-owned subsidiary of Hogan Lovells International LLP but is not itself a law firm. For further details of Hogan Lovells Solutions Limited and the international legal practice that comprises Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses ("Hogan Lovells"), please see our Legal Notices page. © 2022 Hogan Lovells.

Attorney advertising. Prior results do not guarantee a similar outcome.