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THE LATEST: Employee “No-Poaching” Agreements Remain in the Antitrust Crosshairs

There have been a series of investigations, class action suits and high value settlements involving agreements not to solicit employees. In addition, the Department of Justice (DOJ) Antitrust Division made a splash a few months ago when it announced that it would criminally investigate and prosecute employers that engage in certain “naked” no-poach or wage-fixing agreements.

WHAT HAPPENED:
  • Employees filed a civil class action against the Carl’s Jr. hamburger chain because of a no-hire provision in its franchisee agreements.
  • The plaintiffs allege that Carl Karcher Enterprises (CKE), the franchisor, includes the no-hire provisions in its standard agreement to prevent its restaurants from hiring each other’s shift leaders. According to the complaint, the clause appears in the same part of the agreement that also prevents franchisees from competing for each other’s customers.
WHAT THIS MEANS:
  • The plaintiffs’ bar continues to view employee no-hire/non-solicitation agreements as a profitable area to bring class actions.
  • The DOJ’s policy guidance states that only “naked” agreements among employers will justify criminal enforcement. This means agreements that are not ancillary to some other joint competitive activity. Here, the restraint is arguably ancillary to operating a franchise chain.
  • Plaintiffs’ success likely will hinge on whether they can show that the agreement between the franchisor and its franchisees is really among separate entities rather than a single economic unit under the Copperweld
  • The Franchisor’s business justifications also are likely to be important as this litigation progresses.
  • Companies need to be sensitive to employment restrictions involving other employees such as non-solicitation or no-hire agreements.



Detroit Nurses Object to Sixth Circuit Reviewing Class Certification Decision

On October 11, 2013, the plaintiffs in the Detroit nurses litigation who have accused Detroit-area hospitals of conspiring to suppress their wages opposed VHS of Michigan, D/B/A Detroit Medical Center’s (DMC) petition to the Sixth Circuit for leave to appeal the district court’s decision granting class certification.

DMC had asked the Sixth Circuit to do an interlocutory appeal of a September ruling certifying a class of more than 20,000 registered nurses seeking more than $1.7 billion in damages based on a purported antitrust conspiracy among Detroit-area hospitals to reduce nurse wages.

The lawsuit was first filed in December 2006 and accuses the Detroit area hospitals of conspiring with one another to keep registered nurses’ wages low.  In particular, the lawsuit alleges that the hospitals agreed to exchange compensation information to reduce wages and competition to hire and retain Detroit nurses.  DMC is the only remaining defendant in the case.  The other seven defendants previously settled the litigation.

In September, a district court judge granted plaintiffs’ motion for class certification.  The hospital asked the Sixth Circuit to review that ruling a few weeks later.  In support of that request, DMC argued that the district court’s decision conflicts with the approach followed by other federal courts and raises important questions about the proper interpretation of the Supreme Court’s recent decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) (Comcast).

In particular, DMC argued that plaintiffs should not have been able to establish predominance through a damages model that calculated damages based in part on a theory of liability (wage fixing claim) that had already been dismissed on a motion for summary judgment.  In addition, DMC argued that the district court failed to take a “close look” at the damages model before certifying the class.

Plaintiffs argued that DMC attempted to make a strained analogy to Comcast and also criticized DMC for raising arguments on appeal that were not raised with the district court.  Plaintiffs argued that this case does not present the sort of “novel or unsettled question” of “class litigation in general” that is worthy of the Sixth Circuit’s discretionary review.

The full case name is In re: VHS of Michigan, Inc., No. 13-113 (6th Cir. filed Sep. 27, 2013).




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