Antitrust Claims Related to Employee Poaching: Can company enter into contract restricting each other from poaching their respective employees.
Antitrust Claims Related to Employee Poaching
Academic Medical Centers Target of Latest Employee Anti-Poaching Antitrust Claim
Publications
July 1, 2015
An assistant professor at Duke University School of Medicine recently filed a class action lawsuit alleging that Duke illegally conspired with the University of North Carolina (UNC) and others not to hire each other's medical faculty. Dr. Danielle Seaman, a radiologist, claims the purpose of this conspiracy was to depress compensation for faculty members in violation of federal antitrust law. She seeks treble damages for herself and others similarly situated. Danielle Seaman v. Duke University; Duke University Health System, et al., Case No. 1:15-cv-462 (M.D.N.C.).
Seaman claims she uncovered an illegal "anti-poaching" agreement between the two academic healthcare centers when she attempted to apply for a thoracic radiology position at UNC. Seaman claims she was told by UNC's Chief of Cardiothoracic Imaging that she was rejected as an applicant because the deans of UNC and Duke had agreed to block lateral moves of faculty between the universities. Seaman's complaint alleges the agreement was formally reached between the dean of Duke School of Medicine, and the dean of the UNC Chapel Hill School of Medicine after Duke had tried to recruit the entire UNC bone marrow transplant team. Seaman alleged the agreement had been ratified and enforced by both parties for several years.
According to Seaman, the schools could accept a lateral hire if the position constituted a promotion. However, if a prospective job applicant was a professor, which is the highest position for medical faculty, the applicant would be fully blocked from pursuing a position with the other medical system.
Duke and UNC are two of the largest employers in North Carolina: Duke employs approximately 1,400 basic medical research faculty and clinical faculty, while UNC employs 1,500 faculty members. Seaman alleges that due to the proximity of the schools and the lack of alternatives in the area she was foreclosed from a better and high paying job. Seaman reasoned that the "conspiracy was an ideal tool to suppress their employees' compensation" because of its simplicity. "Whereas agreements to fix specific and individual compensation packages would be hopelessly complex and impossible to monitor, implement and police, eliminating entire categories of competition for skilled labor … was simple to implement and easy to enforce."
The Duke-UNC case is the latest in a series of legal actions based on claims that employers entered into pacts not to "poach" each other's employees. In 2010, the Antitrust Division of the U.S. Department of Justice (DOJ) filed a civil complaint similarly alleging that Adobe, Inc., Apple, Inc., Google, Inc., and other California high-tech companies had entered analogous agreements to refrain from actively soliciting or recruiting each other's employees. United States v. Adobe Systems, Inc., Apple, Inc., Google, Inc., Intel Corporation, Intuit, Inc. and Pixar, Case 1:10-cv-01629 (D.D.C. filed September 24, 2010). As in Duke-UNC, the Adobe defendants operated in close geographic proximity to each other and depended on the same skilled labor. The Department of Justice asserted the agreements "restrained competition for affected employees without any procompetitive justification and distorted the competitive process." According to the DOJ, the arrangement "eliminated a significant form of competition to attract highly skilled employees, and … diminished competition to the detriment of affected employees who were likely deprived of competitively important information and access to better job opportunities."
The companies agreed to settle the Adobe case with the government, and entered a consent decree prohibiting them from entering, maintaining or enforcing an agreement that prevented a person from soliciting, cold calling, recruiting or otherwise competing for employees. Subsequently, four of the companies were also sued in a class action by tech workers, in litigation that has tentatively settled for $415 million. In re High-Tech Employee Antitrust Litigation, Case No. 11-CV-2509-LHK.
The Bottom Line
Whether conscious of it or not, many companies compete with each other for employees, particularly in sectors that require highly-trained or -skilled workers. This especially applies, but is not limited to, the healthcare field. An agreement not to hire may be justified if, for example, it is part of negotiations of a transaction and is limited to due diligence or some other legitimate business purpose. Generally, however, agreements not to solicit or recruit each other's employees can carry significant antitrust risk, and may be found to be as anticompetitive as any other agreement not to compete for customers or sources of supply. For purposes of antitrust law, an agreement includes any conscious "meeting of the minds." Anyone with authority to recruit or hire employees could expose a company to the expense and stress of prolonged litigation if not costly liability.
If you have any questions about this issue, please contact one of the authors listed above
Ref. http://www.bassberry.com/publications/2015/07/latest-accusation-of-anticompetitive-employee
Seaman claims she uncovered an illegal "anti-poaching" agreement between the two academic healthcare centers when she attempted to apply for a thoracic radiology position at UNC. Seaman claims she was told by UNC's Chief of Cardiothoracic Imaging that she was rejected as an applicant because the deans of UNC and Duke had agreed to block lateral moves of faculty between the universities. Seaman's complaint alleges the agreement was formally reached between the dean of Duke School of Medicine, and the dean of the UNC Chapel Hill School of Medicine after Duke had tried to recruit the entire UNC bone marrow transplant team. Seaman alleged the agreement had been ratified and enforced by both parties for several years.
According to Seaman, the schools could accept a lateral hire if the position constituted a promotion. However, if a prospective job applicant was a professor, which is the highest position for medical faculty, the applicant would be fully blocked from pursuing a position with the other medical system.
Duke and UNC are two of the largest employers in North Carolina: Duke employs approximately 1,400 basic medical research faculty and clinical faculty, while UNC employs 1,500 faculty members. Seaman alleges that due to the proximity of the schools and the lack of alternatives in the area she was foreclosed from a better and high paying job. Seaman reasoned that the "conspiracy was an ideal tool to suppress their employees' compensation" because of its simplicity. "Whereas agreements to fix specific and individual compensation packages would be hopelessly complex and impossible to monitor, implement and police, eliminating entire categories of competition for skilled labor … was simple to implement and easy to enforce."
The Duke-UNC case is the latest in a series of legal actions based on claims that employers entered into pacts not to "poach" each other's employees. In 2010, the Antitrust Division of the U.S. Department of Justice (DOJ) filed a civil complaint similarly alleging that Adobe, Inc., Apple, Inc., Google, Inc., and other California high-tech companies had entered analogous agreements to refrain from actively soliciting or recruiting each other's employees. United States v. Adobe Systems, Inc., Apple, Inc., Google, Inc., Intel Corporation, Intuit, Inc. and Pixar, Case 1:10-cv-01629 (D.D.C. filed September 24, 2010). As in Duke-UNC, the Adobe defendants operated in close geographic proximity to each other and depended on the same skilled labor. The Department of Justice asserted the agreements "restrained competition for affected employees without any procompetitive justification and distorted the competitive process." According to the DOJ, the arrangement "eliminated a significant form of competition to attract highly skilled employees, and … diminished competition to the detriment of affected employees who were likely deprived of competitively important information and access to better job opportunities."
The companies agreed to settle the Adobe case with the government, and entered a consent decree prohibiting them from entering, maintaining or enforcing an agreement that prevented a person from soliciting, cold calling, recruiting or otherwise competing for employees. Subsequently, four of the companies were also sued in a class action by tech workers, in litigation that has tentatively settled for $415 million. In re High-Tech Employee Antitrust Litigation, Case No. 11-CV-2509-LHK.
The Bottom Line
Whether conscious of it or not, many companies compete with each other for employees, particularly in sectors that require highly-trained or -skilled workers. This especially applies, but is not limited to, the healthcare field. An agreement not to hire may be justified if, for example, it is part of negotiations of a transaction and is limited to due diligence or some other legitimate business purpose. Generally, however, agreements not to solicit or recruit each other's employees can carry significant antitrust risk, and may be found to be as anticompetitive as any other agreement not to compete for customers or sources of supply. For purposes of antitrust law, an agreement includes any conscious "meeting of the minds." Anyone with authority to recruit or hire employees could expose a company to the expense and stress of prolonged litigation if not costly liability.
If you have any questions about this issue, please contact one of the authors listed above
Ref. http://www.bassberry.com/publications/2015/07/latest-accusation-of-anticompetitive-employee
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