Recent No-Poach Case Provides Guidance For Labor-Market Antitrust Matters

• Published date: 20 July 2023
• Subject Matter: Antitrust/Competition Law, Law Practice Management, Antitrust, EU Competition , Human Resource Management , Recruiting
• Law Firm: Reavis Page Jump
• Author: Mr Gregory P. Feit

In United States v. Patel - a labor-side criminal antitrust case brought in federal district court in Connecticut¹ - six individuals were recently acquitted of charges of having entered into an illegal conspiracy to restrict hiring and recruiting in the aerospace industry. The decision highlights difficulties in the criminal prosecution of so-called "no-poach" agreements, but also serves as a reminder of the need for extreme employer caution in connection with such issues.

ThePatelAcquittal

InPatel, the Department of Justice claimed that a former manager from aerospace engineering company Pratt & Whitney and five executives from the company's outsourcing suppliers entered into aper seillegal conspiracy under Section 1 of the Sherman Act.² According to the Government, the six defendants, who would have normally competed among themselves for engineering talent, established an unwritten no-poach agreement to refrain from hiring or recruiting engineers and other skilled workers from certain companies, and from recruiting applicants employed by another alleged co-conspirator company.

Under the per se rule, certain practices are deemed irrebuttably unlawful by virtue of their very nature, including based on their presumed substantial potential for pernicious anticompetitive effects. Moving for a judgment of acquittal, the Patel defendants argued that the alleged no-poach agreement did not warrant< em>per se treatment. In response, the Government contended that a no-poach agreement pled as a conspiracy to "suppress competition by allocating employees in the aerospace industry" is properly subject to the per se rule.

The court granted the acquittal motion, relying heavily upon the Second Circuit case Bogan v. Hodgkins.³ That case found that not all no-poach agreements operate as "market allocation" agreements. Although theBogancourt determined that the alleged agreement at issue there, involving hiring restrictions on insurance agents, may have constrained the relevant labor market to some degree, it held that the agreement was not per se unlawful because "it does not allocate the market for agents to any meaningful extent." The Patel court likewise found that the alleged no-poach agreement concerning aerospace engineers was not per se unlawful, since it did not "meaningfully allocate the labor market of engineers from the supplier companies working on" Pratt & Whitney projects.

According to the Patel court, the agreement allowed for so many significant...