Updated as of October 28, 2022
This week, the Department of Justice secured a guilty plea in an antitrust case involving a so-called “no poach” agreement. Below we discussed the matter, United States v. VDA OC, LLC, U.S. District Court, D. Nev., No. 2:21-CR-00098, in April of this year in an examination of the government’s new, aggressive approach to antitrust actions involving the labor market. The plea, entered by health care staffing company VDA, serves as a coda to that article, though the DOJ’s recent efforts to prosecute criminal labor-side antitrust cases show no signs of slowing. Defendant VDA, formerly known as Advantage On Call LLC, pled guilty to having entered into an agreement with a competitor to fix wages of nursing employees working in a Nevada school district and to not hire nurses from each other. According to VDA, the agreement at issue lasted less than nine months and involved only one employee, a single telephone call, and one email to a competitor. Despite the apparently limited nature of the agreement, the DOJ alleged it restricted competition and interfered with workers’ rights to receive competitive wages. The successful prosecution follows two acquittals in a pair of similar antitrust no poach cases this past spring: U.S. v. DaVita Inc., et al., U.S. District Court, D. Colo., No. 1:21-cr-00229 and USA v. Jindal, U.S. District Court, E.D. Tex., No. 4:20-cr-00358. A number of other, similar criminal cases remain pending around the country.
As part of its plea agreement, VDA agreed to pay criminal fines and restitution totaling $134,000. The company’s former regional manager continues to fight the case, and has alleged the government engaged in prosecutorial misconduct.
The guilty plea should serve as a reminder to employers that the DOJ’s Antitrust Division is in the midst of an aggressive antitrust push, and will likely continue to prosecute cases involving any alleged restriction of employees’ ability to gain access to compensation or benefits, or direct agreements between employers to fix or limit their employees’ wages. Employers, managers, and Human Resources professionals who have questions regarding the propriety of such agreements should consult counsel to ensure compliance with antitrust laws.
Below was published on April 26, 2022
Last week, the federal government’s first-ever criminal wage-fixing case ended with acquittals on antitrust charges, although one defendant was convicted of one count of obstruction of justice. Nonetheless, the government’s willingness to bring this case, and the existence of other pending cases, make clear that employers must take seriously the significant implications—even criminal exposure—of their day-to-day activities. The facts of the case should serve as a warning to all employers of the government’s new and aggressive approach to antitrust actions.
The indictment and verdict:
In United States v. Jindal, the Antitrust Division of the Department of Justice (“DOJ”) alleged that defendants (owner and operator of a physical therapist staffing company located in Texas) had illegally coordinated with five other competing therapist staffing businesses to collectively lower wages paid to their employees, in violation of 15 U.S.C. § 1, the Sherman Antitrust Act. In general terms, the Sherman Antitrust Act, together with other state and federal antitrust laws, prevent competing businesses from fixing prices, dividing markets, or rigging bids in ways that are believed to suppress competition.
The indictment alleged the defendants sought to lower wages across the market, then took steps to cover up their actions when the Federal Trade Commission began an investigation. Attorneys for the defendants argued there was no anti-competitive action, and therefore no violation of the antitrust law at issue. The government’s indictment cited text messages the defendants had allegedly shared with competitors in the industry regarding the rates they sought to pay their employees, and further alleged the messages constituted an agreement to cap or otherwise limit employees’ wages. The government claimed the communications (which might appear fairly innocuous to a layperson without any knowledge of antitrust law) constituted a conspiracy intended to lower wage rates, thereby unreasonably restraining interstate trade and commerce in violation of the Sherman Act. The jury acquitted both defendants on the wage-fixing charges, but found the company’s owner guilty on a single obstruction charge.
Despite the acquittals, the criminal theory has been validated:
Despite the acquittals on the novel charges, the DOJ has signaled that it nonetheless interprets the outcome as a win: earlier in the litigation, the court denied the defendants’ motion to dismiss the antitrust charges, holding that “the definition of horizontal price-fixing agreements cuts broadly. As such, any naked agreement among competitors – whether by sellers or buyers – that fixes components that affect price meets the definition of a horizontal price-fixing agreement.” The court held the Sherman Act protects sellers of services to the same extent it protects buyers. The government may continue to rely on that decision as precedent affirming that wage fixing constitutes a form of price-fixing, which is illegal under the Sherman Act. No federal appeals court has decided the issue.
Free and open lateral recruiting is an important aspect of competitive labor markets. The government’s theory in prosecuting these cases appears to be that when employers restrict employees’ ability to gain access to compensation or benefits packages—whether through a naked no-poach agreement (an illegal deal made between competitors not to hire or otherwise pursue each other’s employees) or through a direct agreement to fix wages such as the one at issue in the Jindal case, workers are deprived of options due to a lack of competition in the labor market. From the government’s perspective, these issues cut to the heart of a competitive and free market. As a result, the DOJ stepped up its scrutiny of these activities as part of an aggressive antitrust push. In 2016, the DOJ and the Federal Trade Commission issued guidelines for Human Resources professionals on avoiding violations of antitrust laws concerning no-poach agreements and wage-fixing; those guidelines indicated the DOJ could pursue criminal investigations for violations. Now the DOJ seems to be following through.
Other cases to watch:
The Jindal case represents the first jury verdict in several antitrust cases currently pending, with two similar wage-fixing cases underway in Maine and Nevada federal courts. The Maine case (United States v. Manahe, et al, U.S. District Court, D. Me., No. 2:22-CR-00013) involves personal care service workers employed by home health care agencies, while the Nevada case (United States v. VDA OC, LLC, U.S. District Court, D. Nev., No. 2:21-CR-00098) involves nurses employed by health care staffing companies.
Notably, in remarks to the ABA Institute on White Collar Crime last month, Attorney General Merrick Garland stated that the Antitrust Division of the DOJ currently has “146 open grand jury investigations—the most in 30 years.” It is quite possible some of those investigations concern allegations of wage-fixing.
Alleged naked no-poach agreements are also the subject of ongoing litigation in a number of states, including Connecticut, where skilled aerospace workers have claimed Pratt & Whitney, Raytheon Technologies Corporation, and others conspired to restrict competition for skilled labor. This case is Doe v. Raytheon Technologies Corporation, et al, U.S. District Court, D. Conn., No. 3:22CV00035. A related criminal proceeding (United States v. Patel, et al, U.S. District Court, D. Conn., No. 3:21-CR-00220-VAB) is also underway.
Takeaways for employers:
These developments demonstrate the importance of vigilant compliance with competition law—which includes the policies themselves, training, and enforcement. No-hire or no-poach agreements that allocate the market, or even informal agreements between competitors to set wages (regardless of intent or lack of awareness that these practices may be prohibited) could constitute an unreasonable restraint of trade under the Sherman Act. It is important for managers to understand that even tacit understandings with their counterparts in companies competing for talent could run afoul of these laws. Companies should instead consider reviewing and strengthening noncompetition and nonsolicitation provisions in agreements with their employees.
The Jindal case also serves as a reminder of the often thin line between civil and criminal exposure that employers face in employment matters and in other aspects of their business.
Antitrust enforcement in employment law is a complicated and evolving issue. Executives, Human Resources professionals, and management alike should take heed and consult counsel with any questions regarding the propriety of any activity or agreement that may violate antitrust laws.