Faculty Non-Poaching Agreements Pose Significant Antitrust Risks

February 12, 2018 Advisory

In an important development for colleges and universities throughout the United States, a federal district court judge on February 1, 2018 certified a class of medical school faculty members in an antitrust suit against Duke University and the University of North Carolina. The class action suit alleges that Duke and UNC had an agreement not to permit lateral moves of faculty members between Duke and UNC, i.e., a non-poaching or non-solicitation agreement. Seaman v. Duke University, et al., (M.D.N.C., No. 1:15-CV-462). The suit was filed in 2015 by Dr. Danielle Seaman, a radiologist at Duke University. Prior to certifying the class of medical faculty members, the same court on January 4, 2018, approved a class action settlement involving injunctive relief only between Dr. Seaman and UNC, leaving Duke to defend against the antitrust allegations.

The suit serves as an important reminder to colleges and universities of the very substantial antitrust risks involved in explicit or implicit agreements not to recruit faculty or staff from other institutions or to follow any informal agreements with other institutions on matters affecting recruitment or payment of faculty or other staff. Federal antitrust authorities have made this clear in recent years, emphasizing the substantial penalties that may apply to such conduct.

For several years prior to the suit by Dr. Seaman, the Antitrust Division of the U.S Department of Justice, as well as private litigants, have challenged non-poaching agreements among competitors as violations of the antitrust laws. For example, in 2010, the Antitrust Division entered into settlements with high-tech firms such as Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar. Then, in 2011, a court approved a class action settlement involving Google, Apple, Intel and Adobe for almost $400 million.

Finally, in October 2016, in a very significant development, the Antitrust Division and the Federal Trade Commission jointly issued a document captioned, "Antitrust Guidance for Human Resource Professionals." In this document, which has recently been reaffirmed by the current Assistant Attorney General who heads the Antitrust Division, DOJ stated unequivocally that DOJ could bring criminal antitrust charges against individuals, companies, and non-profit organizations for entering into non-poaching agreements. The federal antitrust laws provide that individuals can be subject to up to ten (10) years in prison and a fine of up to a $1 million, while companies can be subject to fines of up to $100 million. This is in addition to civil remedies, such as triple damages. It is clear from the October 2016 guidance document that it applies to colleges and universities, as the Questions and Answers section of the document includes hypotheticals that involve HR departments of non-profit organizations and universities. The October 2016 guidance document can be read by clicking here.

Needless to say, educational institutions both public and private must adhere to the strictures of the antitrust laws. It is also vitally important to be able to distinguish between legitimate non-compete agreements entered into contractually between a school and one of its employees, which are legally sound if the geographic scope and the length of the non-compete are sufficiently limited, and non-poaching agreements entered by two or more competitors, which pose serious antitrust risks. Consulting with experienced antitrust counsel is important in navigating the perilous shoals of federal and state antitrust law.