UPDATE 1-US drops antitrust case over healthcare hiring agreements

(Updates with comment from Surgical Care in paragraph 7)

By Mike Scarcella

Nov 14 (Reuters) - The U.S. Justice Department has asked a judge to dismiss the government's prosecution of a UnitedHealth Group affiliate accused of unlawfully restricting employee mobility, marking a new setback in the government's push to apply criminal antitrust laws to labor markets.

U.S. prosecutors in a filing in federal court in Dallas asked U.S. District Judge Sam Lindsay to dismiss charges against Surgical Care Affiliates LLC and a related entity, SCAI Holdings LLC.

Deerfield, Illinois-based Surgical Care operates one of the country's largest ambulatory surgery centers.

Surgical Care Affiliates and SCAI Holdings were charged in 2021 with violating U.S. antitrust law in an alleged conspiracy with industry rivals to not solicit each others' senior-level employees.

The government said dismissal of the case "will allow the conservation of this court's time and resources."

A Justice Department spokesperson did not immediately respond to a request for comment.

A representative for Surgical Care in a statement on Tuesday called the Justice Department's move "the right outcome" and said "this case should have never been brought."

UnitedHealth had no immediate comment.

The move comes amid a series of defeats in other closely watched labor-related criminal antitrust cases in federal courts in Texas and elsewhere.

In April, a judge in Connecticut rejected government claims mid-trial that a group of aerospace engineers unlawfully conspired to restrict hiring.

Last year Dialysis provider DaVita and its former CEO Kent Thiry defeated the government's claims at trial that they should be held criminally liable for alleged curbs on hiring.

Justice Department antitrust division head Jonathan Kanter has touted the labor antitrust cases despite the court setbacks, noting that judges have allowed such claims to proceed to trial.

Attorneys for Surgical Care argued the Connecticut federal judge's order in the aerospace case should doom the government's health industry case in Texas.

Justice Department lawyers countered that the Connecticut ruling was specific to the evidence in that case.

(Reporting by Mike Scarcella; Editing by David Bario, Andrea Ricci, Franklin Paul and Jonathan Oatis)