Companies using noncompetes may be criminally prosecuted, Justice Department signals

The Justice Department has opened the door to criminally prosecute companies that have noncompete agreements it deems too restrictive and in violation of antitrust laws, according to a report in JDSupra, a legal analysis company.

Five details:

1. The Justice Department issued a statement in February about a case in Nevada where anesthesiologists sued Pickert Medical Group, alleging the organization's noncompete provisions violated Nevada state law, which limits noncompete covenants.

2. Pickert anesthesiologists were allowed to provide anesthesia services to Renown facilities per an exclusive agreement between the organizations, but if the contract was terminated, the anesthesiologists were prohibited from serving facilities within 25 miles of any Renown facility or other facilities at which the anesthesiologists had previously worked.

3. The anesthesiologists sued to stop Pickert from enforcing the noncompete provisions after Renown announced plans to terminate its agreement with the organization in October 2021.

4. The Justice Department argued the noncompete could be seen as an attempt by Pickert to restrict any competitors within the areas covered by the noncompete agreements, constituting "horizontal restraint between competitors," according to the report.

5. While the Justice Department hasn't brought criminal cases targeting employee noncompete agreements in the past, its statement about the anesthesiologists' lawsuit signals noncompete agreements can be unlawful and potentially criminally scrutinized, expanding criminal liability for common business arrangements.

"With its statement of interest in the Pickert case, [the Justice Department] seems poised to take the next step toward directly targeting non-compete agreements as per se violations of antitrust laws," the article states.

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