A PYMNTS Company

Criminal No-Poach Update: DOJ Seeks to Contain Fallout from Judgment of Acquittal

 |  June 7, 2023

By: Tyson Herrold (Baker Hostetler)

The Department of Justice (DOJ) suffered another setback in its pursuit of treating no-poach agreements as criminal offenses, as evidenced by the recent case of United States v. Patel. In this particular instance, the DOJ accused employees from an aerospace company and their outsourcing competitors of conspiring to limit the hiring and recruitment of aerospace engineers and other staff members, thereby violating the criminal provisions of the Sherman Act. However, on April 28, the U.S. District Court for the District of Connecticut granted the defendants’ motion for judgment of acquittal. The court found that there was insufficient evidence of market allocation, preventing a reasonable jury from establishing, beyond a reasonable doubt, a per se violation of Section 1 of the Sherman Act. Notably, the court pointed out that the government’s case failed to demonstrate any meaningful labor market allocation since the alleged agreement allowed for frequent hiring, which was considered commonplace.

The DOJ’s recent defeat in Patel holds significant implications for another ongoing criminal no-poach case in the Northern District of Texas: United States v. Surgical Care Affiliates. Following the judgment of acquittal in Patel, the DOJ has argued in Surgical Care Affiliates that the reasoning behind the Patel decision was fundamentally flawed from a legal standpoint. They assert that it contradicts decades of Supreme Court and circuit jurisprudence and would effectively permit competitors to agree not to compete for employees, as long as the agreement doesn’t entirely prevent hiring or employee movement. In the case of Surgical Care Affiliates, the crucial question is whether the Northern District of Texas will differentiate the facts or the legal aspects of Patel or potentially create a circuit split that might prompt the Supreme Court to provide clarity on the matter. This scenario raises age-old legal questions in the context of labor markets, necessitating examination within a new factual framework…