DOJ Continues Labor Market Scrutiny with Another Corporate Indictment
Indictment is DOJ's second recently filed in the North District of Texas.
The Department of Justice ("DOJ") has brought a criminal indictment against a corporate defendant for agreeing with competitors not to solicit senior-level employees from each other, in violation of the Sherman Act. Led by DOJ's Antitrust Division and the U.S. Attorney's Office for the Northern District of Texas, this is DOJ's second recent criminal indictment for antitrust violations in labor markets (the prior indictment being for wage fixing), reaffirming its commitment to prosecuting anticompetitive agreements involving no‑poaching, wage-fixing, and other employment-related issues.
Defendant Surgical Care Affiliates ("SCA") operates outpatient medical care centers across the United States. The indictment charges that SCA conspired with two competing outpatient medical center operators not to solicit each other's senior-level employees. The indictment quotes internal emails and other communications from senior executives of SCA and its competitors that describe an "agreement to not poach" each other's employees, including instructions to third-party recruiters that such employees were "off limits." It also alleges that SCA and its competitors monitored compliance with the no-poach agreement by requiring job candidates to notify their current employer that they were seeking other employment in order for their applications to be considered.
This latest indictment was brought against SCA, a corporate entity, and DOJ still may bring charges against individual employees. The Sherman Act violation carries a maximum fine of $100 million, which can be increased to twice the gain derived from the conspiracy or the losses suffered by victims. And criminal antitrust enforcement almost invariably leads to civil litigation, as private plaintiffs use DOJ's criminal enforcement to establish civil antitrust liability.
This is DOJ's first criminal indictment for no-poach agreements. DOJ and the Federal Trade Commission in 2016 issued guidance stating that the agencies view such agreements as per se unlawful and therefore subject to criminal penalties, but prior enforcement in this area had been limited to civil actions.
These latest charges reinforce three key points:
DOJ will criminally prosecute non-solicit agreements as well as no-hire agreements. Consistent with agencies' 2016 guidance, DOJ brought criminal charges for an agreement that falls short of a ban on hiring; the indictment alleges that the defendant entered into agreements not to solicit high-level employees of competitors. The fact that employees themselves could seek and secure new employment with the participants in the alleged conspiracy was insufficient to avoid criminal prosecution.
Continued antitrust enforcement interest in employment issues. DOJ has reiterated in recent years that it intends to prosecute anticompetitive conduct in labor markets, which these latest actions demonstrate. This is unlikely to change in the Biden administration. DOJ's recent enforcement actions underscore the need for inside counsel to be attentive to decisions made by the human resources department, which in the past may not have been a priority.
Criminal charges rely on direct evidence. As with December 2020's wage-fixing indictment, DOJ's indictment against SCA cites explicit admissions by company CEOs as evidence of the no-poach agreement. Any antitrust investigation, criminal or civil, will rely heavily on ordinary-course documents by the alleged participants in the conspiracy. Careful communication, internal and external, is critical to avoid a perception of improper conduct.
