Are "No-Poach" Agreements Between Employers Illegal?

The U.S. Department of Justice (DOJ) Antitrust Division has been bringing criminal charges against employers that enter into so-called “no-poach agreements” with competitors. No-Poach agreements are contracts between competing companies that provide that both entities will not hire each other’s employees. The DOJ prosecutions, if successful, could result in criminal penalties (not just civil money penalties), including prison time, for those convicted.

The DOJ is relying upon Section 1 of the Sherman Act, which provides: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce … is declared to be illegal.” 

This April, the DOJ recently lost such a no-poach case against DaVita, Inc. A Colorado jury found DaVita not guilty of claims that it violated federal antitrust law by engaging in "no-poach" agreements with competitors. The company's former CEO, Kent Thiry, also was found not guilty of the same charges. DaVita faced a maximum penalty of a $100 million fine per count, and Mr. Thiry faced a maximum penalty of 10 years in prison and a $1 million fine per count.

The DOJ continues to take action against no-poach agreements, and this is expected to continue to be an area of enforcement focus for the immediate future.