Earlier this month, the U.S. Department of Justice closed its investigation into the hiring practices of Wilmington-based technology company nCino.

The nearly two-year federal investigation resulted in no fines or other penalties for the company. Still, an ongoing class action lawsuit against nCino has raised questions about how leading local technology firms recruit and hire workers.

nCino, a cloud-based banking company, was founded in 2011 by executives from financial technology firm Live Oak Bank. The company also founded Apiture, another Wilmington-based digital banking company, in 2017.

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A federal investigation

On Feb. 24, 2021, nCino disclosed in a filing with the U.S. Securities and Exchange Commission that the company, its officers and other employees had been served with subpoenas seeking information connected to an investigation of nCino’s “hiring and wage practices under U.S. federal antitrust laws.”

The antitrust division of the U.S. Department of Justice headed up the investigation.

The company was “fully cooperating” with authorities and believed its hiring practices didn’t violate antitrust laws, according to the filing. Nearly two years later, on Feb. 8, 2023, the U.S. Department of Justice told nCino that the investigation had been closed.

“No fines, sanctions, actions, or penalties were imposed or taken against the Company or its officers or other employees in connection with this matter,” the filing states.

Lawsuit raises questions

Before nCino executives received subpoenas, the company got a letter from a law firm informing the company of a potential civil antitrust lawsuit against nCino and Live Oak Bank. A class action lawsuit was filed against nCino, Live Oak Bank and Apiture on March 12, 2021, in North Carolina Eastern District Court.

In the lawsuit, Joseph McAlear, a former employee at Live Oak Bank and Apiture, argues that a “no-hire” agreement between the three companies prevents employment competition, allowing them to pay tech workers lower wages.

“If operating under competitive and lawful conditions, Live Oak Bank and nCino, and Apiture and nCino, would have recruited and hired employees from each other, driving employee pay up,” the lawsuit’s complaint states. “The companies knew this and avoided such competitive wage pressure by entering into the no-hire agreement.”

McAlear joined Live Oak Bank’s financial technology department in 2017 as a project manager. When he needed to hire new employees he was told by coworkers and his manager that the company preferred to hire from outside of the area.

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McAlear later became a vice president at Apiture and when he found a position with nCino that more closely suited his interests and skills, he applied for it. In response, he was told there was a “gentleman’s agreement” between the three companies, which meant they wouldn’t recruit or hire employees from each other, the complaint states.

McAlear expressed his disapproval of the agreement during a conversation with his coworkers and other officials at the company. His position was later eliminated. He again applied to work at nCino and was again rejected.

In the lawsuit, McAlear is seeking damages caused by Live Oak Bank, Apiture and nCino, the costs of bringing suit, attorneys’ fees and a declaration that such agreement is unlawful, according to the initial complaint.

Last year, Live Oak Bank and Apiture paid out $4.65 million to settle the suit to the nearly 2,000 members of the class action. However, the suit against nCino remains ongoing.

"We are happy the process is over and that the expenses associated with cooperating with the investigation will now cease," Ryan Kelly, nCino’s senior public relations specialist wrote in an email to the StarNews, "and we will vigorously defend ourselves in the civil case, which is wholly without merit."

Reporter Emma Dill can be reached at edill@gannett.com.

This article originally appeared on Wilmington StarNews: Federal investigation into nCino wraps up while lawsuit remains open