Legal Alert

DaVita and Former CEO Found Not Guilty in Criminal Conspiracy Case in Alleged Employee ‘No-Poach’ Agreements 

April 26, 2022

Summary

The United States indicted DaVita, Inc., and Kent Thiry, DaVita’s former Chief Executive Officer, last year alleging that they had violated Section 1 of the Sherman Act by engaging in “Conspiracy in Restraint of Trade to Allocate Employees.” The essential elements of the criminal charges were alleged agreements with competitors not to poach each other’s employees.

The trial began that on April 4, 2022, was among the first of its kind since the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued guidance in 2016 stating that the DOJ would prosecute naked no-poaching or wage-fixing agreements. On April 15, 2022, a federal jury found both DaVita and Thiry not guilty of criminal conspiracy. Additionally, on April 14, 2022, a federal jury in Texas found the owner of a physical therapy staffing company, Neeraj Jindal, and John Rodgers, a former clinical director of the company, not guilty of criminal charges related to employee wage-fixing.

While these verdicts may signal that juries are skeptical of the government’s efforts to criminally prosecute companies or individuals in these labor/employment cases, it is unlikely that the DOJ will cease pursuing these types of matters.

The Upshot

  • The DOJ previously indicated that it is focusing on prosecuting anticompetitive action taken by businesses within the labor market.
  • Two federal juries found companies and executives not guilty after criminal trials in which the defendants were charged with violating the Sherman Antitrust Act by entering into no-poach agreements in one case and agreeing to fix wages in another case.
  • There is no indication from the DOJ that it is changing its strategy in pursuing these types of actions to combat what it views as anticompetitive conduct within the labor market.

The Bottom Line

The not guilty verdicts do not mean the DOJ will refrain from prosecuting crimes related to anticompetitive activity in the labor market. Employers should ensure that any labor arrangements with third parties conform with the antitrust laws.

On April 15, 2022, a jury in the U.S. District Court for the District of Colorado found DaVita Inc., a provider of dialysis services, and its former CEO, Kent Thiry, not guilty of criminal conspiracy charges under Section 1 of the Sherman Antitrust Act.  The indictment charged that DaVita and Thiry engaged in criminal conspiracy when they allegedly made agreements with competitors not to solicit each other’s employees.

In addition to the not guilty verdict for DaVita and Thiry, in USA v. Jindal, a jury in the U.S. District Court for the Eastern District of Texas on April 14, 2022, found Neeraj Jindal and John Rodgers not guilty of charges of violating antitrust laws for conspiring with competitors to fix employee wages.  Jindal was the owner of a physical therapy staffing company and John Rodgers was the company’s former clinical director.  The jury did find Jindal, but not Rodgers, guilty of obstruction in that case for obstructing the investigation into the alleged antitrust violations.

By way of background, in October of 2016, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued “Antitrust Guidance for Human Resource Professionals.” The guidance stated that agreements among employers to limit or fix the terms of employment for potential employees may violate antitrust laws because companies that compete to hire or retain employees are competitors in the market place for labor. More specifically, the guidance stated that “[n]aked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third-party intermediary, are per se illegal under the antitrust laws.”  However, the guidance recognizes that agreements that are ancillary or reasonably necessary to a legitimate collaboration are not per se illegal.

The FTC and DOJ warned that they would prosecute violations both civilly and criminally. Until recently, the DOJ had not criminally prosecuted any cases related to no-poach agreements. Within the past year, however, the DOJ has charged multiple companies and individual executives with crimes similar to those charged against DaVita and Thiry related to alleged anticompetitive conduct in the labor market.

A trial on the charges against DaVita and Thiry began on April 4, 2022, and was one of the first of its kind. Prosecutors argued at the trial that DaVita and Thiry conspired with other companies to not solicit each other’s employees from as early as February 2012 until as late as June 2019. The court instructed the jurors in the case that the government had to prove not only that an agreement existed to allocate specific markets for employees, but also that the defendants did so with a specific anticompetitive intent. On April 15, 2022, the federal court jury found both DaVita and Thiry not guilty of criminal conspiracy.

The Antitrust Division of the DOJ under the Biden administration has consistently vowed to put a greater focus on competition in labor markets.

Whether or not the DOJ continues to prosecute these matters criminally, businesses should be aware of the risks if entities enter into so-called no-poach or wage-fixing agreements with other businesses. Businesses should also ensure they have appropriate compliance training and reporting structures in place to both mitigate any such risks and be prepared to deal with them quickly should they nevertheless arise. To that end, if there is any question whether certain conduct in the labor market potentially could raise a concern under the antitrust laws, businesses should seek advice and counsel.

Ballard Spahr’s Labor and Employment and Antitrust and Competition Groups are prepared to answer questions regarding antitrust issues in the context of the labor market, as well as non-solicitation and no-poach provisions. Please contact us if we can assist you in understanding your company’s legal requirements and the measures your business must take to remain in compliance with applicable law.

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