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DOJ Brings First Criminal No-Poach Charges, Doubling Down on Collusion in the Labor Market

Litigation Alert

Today, the Department of Justice's (DOJ) Antitrust Division announced its first criminal charges against a company for allegedly agreeing with competitors not to solicit each other's employees, referred to as a "no-poach" agreement. A Texas federal grand jury indicted Surgical Care Affiliates LLC (SCA), a subsidiary of United Health Care Group and the owner and operator of more than 200 outpatient medical care centers across the United States, for allegedly entering into two separate conspiracies with health care providers not to solicit each other's senior-level employees. According to the indictment, SCA and its co-conspirators allegedly participated in meetings in which they agreed not to recruit each other's senior-level employees, instructed employees and recruiters not to solicit from each other's companies, and refrained from soliciting each other's senior-level employees. The indictment quotes communications from employees of a competitor company describing a "verbal agreement with SCA not to poach their folks . . . ," and that company's Chief Executive Officer's response that "[w]e do have that agreement and want to stick by it."

DOJ has long taken the position that it would bring criminal charges against companies for engaging in "no-poach" agreements and other forms of collusion in the labor market. In 2016, the Antitrust Division issued Antitrust Guidance for Human Resources (HR) Professionals to assist professionals in the human resources sector to avoid running afoul of antitrust laws. According to the Guidance, "[a]n agreement among competing employers to limit or fix the terms of employment for potential hires may violate the antitrust laws if the agreement constrains individual firm decision-making with regard to wages, salaries, or benefits; terms of employment; or even job opportunities." The Guidance warned that the Antitrust Division would criminally investigate, and potentially prosecute, allegations of employers agreeing among themselves to set employee compensation or not to hire each other's employees. 

However, up until now, the Antitrust Division has not brought criminal against a company for allegedly entering into a "no-poach" agreement. Rather, the Division typically has brought civil suits to resolve allegations of "no-poach" agreements, which do not carry the criminal fines or jail sentences for employees that criminal charges do. As a result of the criminal charges today, SCA faces a statutory maximum penalty under the Sherman Act of up to $100 million in fines. The fine may be increased above this amount up to twice the gross gain derived from the crime or loss suffered by the victims. 

In December 2020, we reported that DOJ's Antitrust Division announced its first criminal charges for wage fixing, highlighting the Antitrust Division's increased focus on unfair competition in the HR sector. A federal grand jury, also in Texas, indicted the former owner of a health care staffing company for allegedly conspiring with competing health care staffing companies to lower the rates paid to physical therapists and physical therapy assistants in Texas. The former staffing company owner also was charged with obstruction of justice for allegedly making false and misleading information during the government's investigation. As a result of the antitrust charges, the former staffing company executive faces up to 10 years in prison and a $1 million fine. The executive also faces an additional five years in prison and a $250,000 fine for the obstruction charges.

The Antitrust Division's recent criminal "no-poach" and wage-fixing indictments demonstrate the gravity with which the Division views anti-competitive conduct in the labor market. Companies and HR professionals should take heed that improper discussions or agreements with competing employers seeking to hire the same employees could expose them to criminal charges. To avoid inadvertently engaging in such conduct, companies should carefully examine their antitrust compliance programs to ensure they are structured to effectively prevent and detect antitrust violations, including in the HR sector. The need for an effective compliance program is especially acute in light of the Antitrust Division's new antitrust compliance policy, which for the first time allows the Antitrust Division to consider the effectiveness of a company's compliance program when deciding whether to bring criminal charges. Implementing a robust compliance program that is tailored to the risks of the HR sector is the most effective way to head off a potential antitrust violation and ultimately demonstrate compliance in the event of a DOJ investigation or criminal prosecution.

For more information, please contact:

Lauren E., 202-626-5966

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