Surgical Care, Others Sued by Employees Over No-Poach Clauses

On Friday, a putative class action lawsuit was filed against Surgical Care Affiliates LLC (SCA), DaVita Inc., and United Surgical Partners International, Inc. (USPI) in the Northern District of Illinois. The three companies, who specialize in running outpatient care facilities, are accused of maintaining a multi-year no-poach agreement between their respective companies.

The suit comes after the Department of Justice charged Surgical Care in January in connection with the agreement.

The proposed class is made up of “senior level employees”, which means nobody below a director position. Excluded from the class are any senior employees who participated in this alleged no poach scheme.

The defendants are some of the largest employers in the outpatient medical care industry in the United States and collectively operate over 3,500 facilities across the country, the complaint said. The filing claimed that there is a high demand and limited supply of director-level and above employees who have experience in the outpatient medical care industry. Lateral hiring in this industry is a key component of maintaining a competitive job market. 

Ordinarily, these companies’ recruiters would reach out to employees and actively make an effort to take them away from their current employer. This causes other companies to do things like preemptively raise pay in order to increase morale and productivity and counteract any potential recruitment efforts on the part of other companies. Increased movement of one category of employee not only increases the compensation for those employees, but also for the categories of employees who are likely to also seek parallel lateral positions, with similar higher compensation and benefits. 

However, practices like this can be potentially costly for these companies, the complaint alleged; they do not want to increase their payscale, which would increase costs across the board, so they begin participating in anticompetitive behavior like no-poach agreements. 

The plaintiffs alleged that the defendants had been participating in this agreement for approximately seven years, ending in 2017. They say that SCA, DaVita, and USPI participated in meetings, conversations, and communications to discuss the solicitation of each other’s senior-level employees, and agreed during those meetings, conversations, and communications not to solicit each other’s senior-level employees. 

One example the plaintiffs cite as evidence of this conspiracy is that the CEO of USPI emailed other employees of USPI that “I had a conversation w Andrew Hayek re people and we reached agreement that we would not approach each other’s proactively.” Andrew Hayek is the CEO of SCA. Another piece of evidence cited in the document is an email between CEO of DeVita Kent Thiry and Andrew Hayek that reads: “Someone called me to suggest they reach out to your senior biz dev guy for our corresponding spot. I explained I do not do proactive recruiting into your ranks.” 

According to the plaintiff, the only instance where senior level employees would have the opportunity to switch companies was if they came to them on their own volition and notified their employer beforehand. After that the two companies would communicate between one another and decide whether the other one was willing to lose the employee. This policy was promulgated between select members of the defendants HR, recruiting, and executive groups, mostly via email.

The plaintiffs claim that this behavior is in violation of the Sherman Act and ask that the court concur with this accusation and certify this case as a class action. They also seek injunctive relief, declaring the no-poach agreement among defendants unlawful and enjoining defendants from enforcing the agreement or entering into similar agreements going forward. 

The plaintiff is represented by Wexler Wallace.