The Department of Justice’s (“DOJ”) Antitrust Division has brought its third criminal antitrust case involving labor markets — this time against a healthcare staffing company and its former manager for allegedly agreeing not to solicit or hire its competitor’s contract nurses and to fix wages for those nurses. The case comes on the heels of the Antitrust Division’s first-ever criminal case involving “no-poach” conduct brought in January 2021, where it charged Surgical Care Affiliates, LLC (“SCA”) for allegedly agreeing with a competitor not to solicit one another’s senior-level employees. Another indictment focused on wage-fixing conduct was announced in December 2020. The Antitrust Division now has three active criminal cases involving agreements to restrict competition in health-care related labor markets. Similar investigations in other industries are believed to be pending. Companies should take note: the recent slew of enforcement activity highlights the need to educate senior executives and recruiting personnel that the Antitrust Division is on the hunt for this type of conduct, which it considers criminal.
Indictments Focus on Purported Written Communications
On March 30, 2021, a federal grand jury in Las Vegas, Nevada, returned a one-count indictment charging VDA OC LLC (“VDA”), formerly Advantage On Call LLC, and a former manager, Ryan Hee, for conspiring with an unnamed competitor company to allocate employee nurses and to fix those nurses’ wages, in violation of the Sherman Act.1 According to the indictment, the Clark County School District (“CCSD”) in Nevada contracted with both VDA and the other private healthcare staffing company in 2013 to provide nurses who attended to students requiring specialized medical care. Beginning in or around October 2016 and continuing at least until July 2017, VDA, Hee and the other staffing company allegedly entered into an agreement not to recruit or hire each other’s nurses assigned to CCSD and to refrain from raising those nurses’ wages.
The indictment alleges that the parties carried out the no-poach and wage-fixing conspiracy via conversations and communications between executives, including over email. In one email, Hee purportedly stated that VDA would “not recruit any of your active CCSD nurses,” whereupon an individual from the other company wrote back, “Agreed on our end as well.”2 The two staffing companies also allegedly agreed that if a nurse employed by one company sought employment with the other, the other company would notify the employing company immediately and would not discuss potential employment with the nurse. Further, the indictment claims they agreed not to negotiate any wage increases with nurses assigned to CCSD, with Hee purportedly stating in one email that “[i]f anyone threatens us for more money, we will tell them to kick rocks!”3 As with the Antitrust Division’s no-poach case against SCA this past January, the indictment relies upon purported written communications evidencing the alleged agreement.
One unique aspect of the Antitrust Division’s case against the healthcare staffing company is that the alleged agreement concerned only those nurses employed by the same client, CCSD. By contrast, DOJ’s no-poach case against SCA involved a purported agreement between competitors not to solicit and hire each other’s senior level employees at the respective companies — not employees who had been contracted out to a mutual client. In that sense, the VDA case is somewhat of a hybrid between a no-poach case and a more traditional Sherman Act Section 1 case, where competitors are charged with agreeing to restrict supply or fix prices charged to customers, in restraint of competition for a good or service sold by both. Despite these variations, as the Antitrust Division announced in 2016 in its joint Antitrust Guidelines for Human Resource Professionals with the FTC, DOJ now treats such agreements as “per se” illegal, meaning that they may be treated as automatically prohibited without any opportunity for the defendants to argue business justifications.
Are Employers on Notice that DOJ Seeks Criminal Penalties for No-Poach Violations?
Although DOJ announced in 2016 that it would soon begin criminally prosecuting no-poach agreements, to date, no court has defined such agreements as per se unlawful. Accordingly, SCA is challenging the no-poach indictment filed against it in a Texas federal court on the grounds that due process concerns and a lack of fair notice dooms the ability of DOJ to charge this conduct criminally.4 The U.S. Chamber of Commerce submitted a brief in support of SCA’s position.5 Under the Fifth Amendment’s Due Process Clause, the government is prohibited from enforcing a criminal statute that fails to provide a person with adequate notice of the prohibited conduct. While notice typically comes from a criminal statute itself, the contours of what constitutes a criminal violation under the Sherman Act — which is broadly written to prohibit any unreasonable restraint of trade — has been shaped by the courts. As SCA and the Chamber of Commerce argue, because no court has defined no-poach agreements as per se unlawful, DOJ is prohibited from prosecuting such conduct as a criminal violation.6
Furthermore, the Antitrust Division itself, along with recent caselaw, recognizes the legality of certain types of discussions between employers regarding their employees, which may occur for a variety of reasons, and many of which are not driven by bad intentions. The Antitrust Division distinguishes, for example, non-solicitation provisions included in a business arrangement, such as a joint venture or teaming agreement, as not inherently problematic, because they are ancillary to a legitimate collaboration.
Whether criminal defendants facing labor market antitrust charges will ultimately prevail on a due process defense remains to be seen. In the meantime, companies should expect this enforcement trend to continue. Prosecuting collusion in labor markets is a top priority for the Antitrust Division, which views no-poach conduct as “rob[bing] American workers of higher pay and the ability to bargain for better, higher-paying jobs.”7 Company executives and personnel involved in recruiting should receive training on the antitrust risks associated with discussing hiring practices with competitors. Corporate antitrust crimes carry a maximum penalty of up to $100 million or twice the gain or loss caused by the conduct, whichever is greater, while individual defendants face penalties of up to $1 million and 10 years in prison.8 The indictments against VDA and SCA, and the related evidence (e.g., emails) may serve as useful case studies for training.
1 Criminal Indictment, United States v. Hee, Case No. 2:21-cr-00098 (D. Nev. Mar. 26, 2021), ECF No. 1, available at https://www.justice.gov/opa/press-release/file/1381556/download [“Indictment”].
2 Indictment ¶¶ 14a, 14b.
3 Indictment ¶ 14d.
4 Memorandum in Support of Defendants’ Motion to Dismiss, United States v. Surgical Care Affiliates, LLC & SCAI Holdings, LLC, Case No. 3:21-cr-00011-L (Mar. 26, 2021, N.D. Tex.), ECF No. 38-1.
5 Brief of Amicus Curiae Chamber of Commerce of the United States of America, United States v. Surgical Care Affiliates, LLC & SCAI Holdings, LLC, Case No. 3:21-cr-00011-L at 2 (Apr. 2, 2021), https://www.chamberlitigation.com/sites/default/files/cases/files/21212121/U.S.%20Chamber%20Amicus%20Brief%20–%20United%20States%20v.%20Surgical%20Care%20Affiliates%20LLC%20%28N.D.%20Tex.%29.pdf.
6 Id. at 4-5.
7 Press Release, Dep’t of Justice, Health Care Staffing Company and Executive Indictment for Colluding to Suppress Wages of School Nurses, March 30, 2021, available at https://www.justice.gov/opa/pr/health-care-staffing-company-and-executive-indicted-colluding-suppress-wages-school-nurses.
8 The Antitrust Laws, Fed. Trade Comm’n: Guide to Antitrust Laws, https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws (last visited Mar. 7, 2021).
