The Department of Justice kicked off 2021 with its first publicly filed, two-count indictment against Surgical Care Affiliates, LLC (SCA) and successor entity Scai Holdings, LLC, both accused of criminal antitrust violations for agreeing with other healthcare companies not to solicit each other’s senior-level employees. The charges are the first to come out of an ongoing investigation by the Antitrust Division into alleged no-poach agreements between employers.
The indictment alleges that SCA entered into two bilateral no-poach conspiracies. One agreement between SCA and a Texas based company ran from May 2010 until October 2017. The second agreement, spanning from February 2012 until July 2017, was between SCA and a Colorado based company for the same prohibitive acts.
“The charges demonstrate the Antitrust Division’s continued commitment to criminally prosecute collusion in America’s labor markets,” Assistant Attorney General Makan Delrahim said in a statement. “A freely competitive employment market is essential to the health of our economy and the mobility of American workers. Along with our law enforcement partners, the division will ensure that companies who illegally deprive employees of competitive opportunities are not immune from our antitrust laws.”
Historically, federal agencies have only brought civil enforcement actions against violators; however, in 2016, the Antitrust Division released antitrust guidance for human resource (HR) professionals and announced their intent to criminally prosecute companies that agree not to hire or recruit one another’s employees. In 2016, Acting Assistant Attorney General Renata Hesse of the Justice Department’s Antitrust Division said that “HR professionals need to understand that these violations can lead to severe consequences, including criminal prosecution. The newly released joint guidance provides HR professionals with information to prevent violations and report potentially unlawful activity, furthering the Justice Department’s commitment to protect workers from harmful conduct that stifles competition.”
According to the guidance, HR professionals and other company employees can avoid breaking antitrust laws by avoiding informal or formal, written or unwritten, or spoken, or unspoken agreements regarding the terms of employment with firms that compete to hire employees. The guidance states that an individual is likely running afoul of antitrust laws if they:
- agree with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range (so-called wage-fixing agreements), or
- agree with individual(s) at another company to refuse to solicit or hire that other company’s employees (so-called “no poaching” agreements).
While certain of SCA’s alleged actions would appear to constitute a “naked” unlawful agreement with competitors not to solicit each other’s employees—including meetings, telephone calls and correspondence reflecting an express agreement between the parties—other activities set forth in the indictment are potentially consistent with lawful, unilateral conduct that companies might undertake to preserve legitimate business interests. These activities include, for example, unilaterally instructing employees and recruiters not to solicit or hire employees from certain competitors, conduct that but for an underlying agreement with another employer, should not give rise to liability under the antitrust laws.
The indictment against SCA is a reminder (and warning) to healthcare entities that no-poach agreements carry significant antitrust risk. Companies should carefully scrutinize their HR practices and implement appropriate compliance measures to avoid potential antitrust liability around the solicitation and hiring of employees. Companies might also consider examining their existing collaborations and relationships with third parties to identify hiring restrictions associated with those arrangements that could be problematic.