Salespeople are paid on commission in many industries. Viewed transactionally, however, there is not much difference between a legal commission and an illegal kickback. In many cases, kickbacks are very much like commissions except that there is a specific law prohibiting them. In others, kickbacks are used to improperly remunerate people or illegally influence them.
Kickbacks can be prohibited even in areas where commissions are lawful. For example, in the financial services industry, brokers and dealers can work on commission. However, if they receive payments meant to encourage them to influence the markets, those payments would be illegal kickbacks.
Likewise, real estate brokers are generally paid by commission, but money meant to steer clients toward particular service providers would be considered a kickback.
Government and public works kickbacks
The types of payments people and companies can accept are legally limited in federal and state contracting and public works projects. For example, contractors who submit bids for public works projects are prohibited from offering kickbacks in exchange for information about other bids. Whenever there is an unusual quid pro quo involved in a federal or state contract, it may violate the applicable False Claims Act.
The prohibition on kickbacks also applies to government contractors of all kinds, including military contractors. They may not offer or give anything of value in exchange for special consideration of their bids, which is called bid rigging.
Kickbacks in government healthcare programs
There are two specific laws that prohibit kickbacks in the context of the federal healthcare programs Medicare, Medicaid and TRICARE:
The Stark Law, also known as the Physician Self-Referral Law, applies to services payable by Medicare or Medicaid. It prohibits improper financial relationships between hospitals and referring physicians, such as kickbacks that incentivize financial decision-making over the wellbeing of patients. Specifically, it prohibits healthcare providers from paying referrals for patients when doctors or their immediate family members have a direct or indirect financial interest in the referral.
The Anti-Kickback Statute is a criminal law with a similar effect to the Stark Law. It prohibits healthcare providers and doctors from exchanging items of value for referrals for services paid for by government healthcare programs. For example, a lab could violate the Anti-Kickback Statute by paying doctors for referrals of patients who are eligible for Medicare. In that scenario, the doctor could also be in violation of the Anti-Kickback statute.
The upshot is that your organization needs to be vigilant about making any type of payment meant to increase business or to make it more likely you will be awarded a contract by a public or government entity. If you have questions, contact an experienced business law attorney.