The DOJ continues its efforts to create a novel area of potential criminal liability for labor market investigations. Historically, government enforcement of alleged anticompetitive labor market practices occurred in the civil context, resulting in fines for companies and individuals found to have participated in inappropriate practices. In late 2016, the DOJ began its campaign to expand Section 1 of the Sherman Act to include naked wage-fixing and no-poach agreements. Since then, labor market criminal investigations—now under their third administration—have become a programmatic and core DOJ investigative priority. This policy shift has resulted in many investigations and more than a dozen criminal cases filed against individuals and corporations to date.
The DOJ’s first two prosecutions for alleged labor market crimes went to trial in spring 2022. The DOJ’s attempts to jam a square peg into a round hole of a per se antitrust law violation resulted in full acquittals on the charged Sherman Act conduct in both instances. Despite the lack of precedent supporting the prosecution of certain labor market practices as per se criminal violations, the DOJ in both instances asserted that the mere existence of any naked wage-fixing or no-poach agreement would constitute a crime. In United States v. Jindal, the first-ever wage-fixing case, the DOJ alleged that the defendants entered into a conspiracy to suppress competition by agreeing to fix prices to lower the pay rates of certain employees. On April 14, 2022, a Texas jury found both defendants not guilty of all Sherman Act charges but convicted one defendant of obstructing a Federal Trade Commission (FTC) investigation.
In United States v. DaVita, Inc. and Kent Thiry (McDermott represented Mr. Thiry in the investigation and trial), the DOJ indicted the defendants on three counts of criminal conspiracy to allocate the market for employees by allegedly entering into non-solicitation agreements with three other companies. This was a landmark case of first impression—the first criminal trial of its kind for liability under the Sherman Act for so-called non-solicit agreements. The court did not agree with the DOJ that a typical per se approach was appropriate. First, the judge held that not every non-solicitation, or even every no-hire, agreement would allocate the market and be subject to per se treatment. The court also required the DOJ to prove that the defendants acted with the specific intent to constrain the labor markets. Given the draconian nature of the per se standard, the court held that the DOJ would “not merely need to show that the defendants entered the non-solicitation agreement and what the terms of the agreement were. It will have to prove beyond a reasonable doubt that the defendants entered into an agreement with the purpose of allocating the market” and that the defendants “intended to allocate the market as charged in the indictment.”
There were two important jury instructions in the same matter. In one, the court instructed that the jury “may not find that a conspiracy to allocate the market for the employees existed unless you find that the alleged agreements and understandings sought to end meaningful competition for the services of [...]