The U.S. Department of Justice's Antitrust Division (DOJ) has made good on a promise it made over four years ago to criminally charge companies that agree not to solicit each other's employees in so-called "no poach" agreements or that agree not to compete on wages or salaries in so-called "wage-fixing" agreements. In the waning days of the Obama administration, the DOJ announced it would begin criminally prosecuting collusive conduct affecting labor markets;1 now, in the waning days of the Trump administration, the DOJ has followed through.
On January 5, 2021, a federal grand jury returned a two-count indictment charging Surgical Care Affiliates (SCA) with violating the Sherman Act for agreeing with two other companies not to solicit senior-level employees.2 Notably, these are the first criminal charges brought by the DOJ for employee allocation, or "no poach" agreements between employers.3 According to the indictment, all three companies owned and operated outpatient medical care facilities across the United States.
In published remarks, outgoing Assistant Attorney General Makan Delrahim explained that the charges "demonstrate the Antitrust Division's continued commitment to criminally prosecute collusion in America's labor markets" because "[a] freely competitive employment market is essential to the health of our economy and the mobility of American workers," and reiterated that "companies who illegally deprive employees of competitive opportunities are not immune from our antitrust laws."4
The indictment charges SCA with entering into two separate conspiracies with other healthcare companies to suppress competition between them for the services of senior-level employees. According to the indictment, beginning from around May 2010 until October 2017, SCA conspired with a Texas-based company to allocate senior-level employees by agreeing not to solicit each other's senior-level employees. In addition, from around February 2012 until July 2017, the indictment alleges SCA separately conspired with a Colorado-based company to allocate senior-level employees through a similar non-solicitation agreement.
As alleged in the indictment, both agreements were reflected in documents that contained statements such as:
- "[W]e reached agreement that we would not approach each other's [senior executives] proactively."5
- "[in light of] the verbal agreement with SCA to not poach their folks"6
- "Someone called me to suggest they reach out to your senior biz dev guy for our corresponding spot. I explained I do not do proactive recruiting into your ranks."7
- "[SCA cannot recruit from the other company] unless candidates have been given explicit permission by their employers that they can be considered for employment with us."8
As suggested by the indictment, these statements and others appear to be key support to the DOJ's prosecution.
The SCA indictment comes on the heels of another recent DOJ prosecution affecting the U.S. labor markets, also in the healthcare sector. On December 10, 2020, the DOJ charged the former owner of a Texas-based therapist staffing company, Neeraj Jindal, with criminal wage-fixing.9 In that indictment, the DOJ alleged that Jindal conspired with another staffing company to share non-public pay rates for physical therapists and physical therapist assistants, and agreed to decrease those rates for a period from about March 2017 to August 2017.10 Much of the communication occurred via text message, including one exchange where the owner of the competing staffing company complained to a subordinate of Jindal that "the therapists are overpaid."11 In addition, the DOJ alleged that Jindal obstructed a related FTC investigation by providing false statements and withholding or concealing relevant information.
Taken together, these two recent criminal prosecutions demonstrate the DOJ's continuing focus on rooting out and deterring employer collusion in the U.S. labor markets. Senior executives, human resource personnel, third-party recruiters, and others involved in recruiting and hiring may be subject to criminal prosecution in "no poach" or "wage-fixing" cases. Companies should be mindful of the DOJ's actions and interest in this area and reexamine their compliance programs to ensure they address and prevent collusive behavior that could restrict the recruiting, solicitation, hiring, or compensation of employees. In addition, companies should encourage all involved in hiring and recruiting to review and familiarize themselves with the Antitrust Guidance for Human Resource Professionals published jointly by the DOJ and FTC in October 2016.12
For more information, please contact Mark Rosman, Wendy Waszmer, Jeff VanHooreweghe, or another member of the firm's antitrust and competition practice.
[1] U.S. Dep’t of Just. & Fed. Trade Comm’n, Antitrust Guidance for Human Resource Professionals (Oct. 2016), https://www.justice.gov/atr/file/903511/download; see WSGR Alert, “DOJ and FTC Put HR Executives on Notice That Anticompetitive Hiring and Compensation Practices May Be Subject to Criminal Prosecution” (Oct. 24, 2016), https://www.wsgr.com/en/insights/doj-and-ftc-put-hr-executives-on-notice-that-anticompetitive-hiring-and-compensation-practices-may-be-subject-to-criminal-prosecution.html.
[2] Indictment, United States v. Surgical Care Affiliates, LLC, et al., No. 3-21-cr-00011 (N.D. Tex. Jan. 5, 2021), https://www.justice.gov/opa/press-release/file/1351266/download.
[3] Press Release, U.S. Dep’t of Just., “Health Care Company Indicted for Labor Market Collusion” (Jan. 7, 2021), https://www.justice.gov/opa/pr/health-care-company-indicted-labor-market-collusion.
[5] Indictment, United States v. Surgical Care Affiliates, LLC, et al., No. 3-21-cr-00011 (N.D. Tex. Jan. 5, 2021), https://www.justice.gov/opa/press-release/file/1351266/download.
[9] Press Release, U.S. Dep’t of Just., “Former Owner of Health Care Staffing Company Indicted for Wage Fixing” (Dec. 10, 2020), https://www.justice.gov/usao-edtx/pr/former-owner-health-care-staffing-company-indicted-wage-fixing.
[10] Indictment, United States v. Neeraj Jindal, No. 4:20-cr-00358 (E.D. Tex. Dec. 9, 2020), https://www.justice.gov/opa/press-release/file/1344191/download.
