Health Care Company Indicted for Labor Market Collusion
The Department of Justice Antitrust Division charged Surgical Care Affiliates LLC with two counts of collusion with the labor market on January 7, 2021. The indictment claims the company “enter in two separate bilateral conspiracies with other health care companies to suppress competition between them for the services of senior-level employees.”
Surgical Care Affiliates LLC (SCA) owns centers throughout the United States that focus on outpatient medical care. According to its website, SCA has over 230 surgical facilities and serves roughly one million patients each year. They are accused of violating the Sherman Act by creating an “unreasonable restraint of interstate trade and commerce.” As early as 2010, the SCA entered into agreements with a Texas-based company that they would agree to not solicit, or “poach,” senior-level employees from each other’s companies. The SCA entered into a similar agreement with a Colorado-based company as early as 2012.
In emails obtained by the grand jury, the companies involved stated they “reached agreement that we would not approach each other’s [senior-level employees’] proactively.” They instructed recruiters and other executives in charge of hiring to remove anyone coming from SCA off their list for interviews for potential hiring. Those who were employed with senior-level positions at the SCA would not be contacted or even considered for any open position.
In some instances, to monitor the compliance of each other’s company, a senior-level employee would have to “notify their current employer that they were seeking other employment for their application to be considered.” As an example, a human resource executive at SCA sent an email in October 2015 that “we would only speak with senior executives if they have told their boss already that they want to leave and are looking.” However, this measure is solely for monitoring purposes, because the companies involved refused to consider those applications regardless if they had informed their boss or not.
Illegal agreements like these limit the opportunities available for executive-level employees within companies to continue to be promoted or find better quality work. They give power to corporations over workers by limiting the free market and opportunities for workers. When companies compete for employees, it keeps them accountable for providing attractive benefits, pay, and helps ensure that the working environment is free from bad-faith bargaining or unfair practices. When that competition goes away and an employee is unable to find work in other firms, they are often left working in sub-par working conditions or are stuck without the ability to move up the career ladder.
Noncompete agreements, however, are contracts that explicitly state to employees that they are prohibited from being employed, or becoming in their own right, a competitor. They take effect when an employee is either fired or quits and can last any period of time as agreed on when entering into an employment agreement. These agreements hold different weights in different states. In California, for instance, non-compete agreements are not enforceable, and if an employer tries to require an employee to sign one and then enacts it after the employment is terminated, that employer can be sued.
The Sherman Act was the first antitrust law passed by Congress. Signed in 1890, it “aimed at preserving free and unfettered competition as the rule of trade.” The act was later expanded in 1914 with the creation of the Federal Trade Commission and the Clayton Act, which both strengthen the antitrust laws and authorities in the US. The Sherman Act prohibits “arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids.” These are deemed “so harmful to competition that they are almost always illegal.”
Violation of the Sherman Act is a criminal offense and will be prosecuted by the Department of Justice. If convicted, the company faces a maximum penalty of $100 million. However, this penalty can be increased to twice the gain the company derived or twice the loss the victims suffered by the crime committed if either of those sums is greater than $100 million.
The FBI and the Department of Justice’s Antitrust division collaborated to conduct this investigation. The two authorities state that this is just the first charge of a continuing investigation. Assistant Attorney General Makan Delrahim of the Antitrust Division within the Department of Justice, along with Steven M. D’Antuono, the Assistant Director in Charge of the FBI Washington Field Office, both commented that investigations like this are the way to preserve the opportunities for American workers and to ensure the health of the economy by promoting a freely competitive employment market.
