DOJ’s Antitrust Division Launches Two Criminal Prosecutions of Illegal No-Poach and Wage-Fixing Agreements
The Antitrust Division has warned companies that it would bring criminal indictments against companies that enter into illegal no-poach or wage-fixing agreements. The Antitrust Division has now put its money where its mouth is, announcing two significant criminal cases at the end of 2020 and at the beginning of 2021, respectively.
The SCA No Poach Case
On January 5, 2021, a federal grand jury returned an indictment charging a criminal violation against Surgical Care Affiliates (SCA) and SCAI Holdings, the successor company to SCA. This is the first criminal prosecution of a no-poach agreement.
SCA operates 230 outpatient surgical facilities in the country that treat more than 1 million patients each year. UnitedHealth acquired SCA in 2017.
SCA allegedly entered into two illegal conspiracies with other health care companies in the hiring of senior executives.
Beginning in 2010 and continuing to 2017, SCA conspired with a company based in Texas to allocate senior-level employees by agreeing not to solicit each other’s senior-level employees.
In a second agreement, starting in February 2012 and continuing to July 2017, SCA conspired with a company based in Colorado to allocate senior-level employees through a similar non-solicitation agreement.
The indictment outlines specific acts relating to the illegal conspiracies. On May 14, 2010, Company A representative wrote an email message reporting on a conversation with SCA’s CEO — “I had a conversation w [SCA CEO] re people and we reached agreement that we would not approach each other’s proactively.”
On November 1, 2013, a Company A employees discussed whether to interview a candidate employed by SCA in light of the “verbal agreement with SCA to not poach their folks.”
Finally, on July 17, 2017, Company A recruiting and human resource employees believed that a candidate was employed by SCA, and a Company employee noted that “although the candidate ‘look[ed] great’ she ‘can’t poach her.’”
The Jindal Wage-Fixing Case
In an earlier criminal case, late in 2020, the Antitrust Division returned an indictment in United States v. Neeraj Jindal, which charged Jindal, an owner of a therapist staffing company in Dallas-Ft. Worth, of conspiracy to fix prices paid to physical therapists and physical therapist assistants. Jindal was also charged with obstruction of the FTC’s civil investigation. According to the indictment, Jindal made false statements to FTC investigators during an interview. Jindal and a co-conspirator agreed to pay lower rates to certain physical therapists and physical therapist assistants in the Dallas-Ft. Worth market. The conspiracy lasted for a short period of time, from March to August 2017.
Antitrust Division History on No-Poach Agreements
Several years ago, the Antitrust Division entered into settlement agreements with several high-tech companies, including Adobe, Apple, Google, Pixar and Intuit, to bar them from agreeing to non-solicitation agreements for employees that prevented the companies from soliciting each other’s employees for hiring opportunities. These illegal agreements were carried out by senior high-tech executives.
In 2016, the Antitrust Division and FTC issued guidance as to the application of antitrust laws to no-poaching and wage-fixing agreements between employers. The guidance stated, “Going forward, the Justice Departments intends to criminally investigate naked no-poaching or wage-fixing agreements that are unrelated or unnecessary to a larger legitimate collaboration between the employers.”
In 2018, DOJ reached a civil settlement with Knorr-Bremse, Westinghouse and Faiveley for engaging in an illegal naked no-poach employment agreement. The alleged conspiracy preceded the 2016 guidance and no criminal charges were lodged. The Antitrust Division continued to warn against criminal prosecution of naked no-poach and wage-fixing agreements among employers. Interestingly, the Antitrust Division often referred to the fact that it was investigating a number of conspiracies and expected to bring criminal prosecutions.
Despite these aggressive statements, no criminal cases materialized – until now.
These recent criminal cases put every company on notice about potential criminal antitrust risks for naked no-poach or wage-fixing agreements among competitors.
In response to this new and significant risk, companies have to focus on HR hiring practices and potential illegal communications among companies involved in hiring and recruiting employees.
While there is nothing wrong in hiring employees who previously worked at a competitor, companies have to develop controls to ensure that such hiring was not the result of an illegal agreement among two or more competitors for employees. The level of risks increases in employee hiring markets in high-tech and other industries where employee specialization is significant.