Human resources antitrust guidance
In 2016, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) (collectively herein, the antitrust agencies) issued joint guidance about potential violations of antitrust laws to human resource (HR) professionals and others involved in hiring and compensation decisions. In that guidance, the agencies warned that wage fixing and no-poach agreements are subject to criminal antitrust charges when competing employers make agreements that constrain or restrict potential hires’ wages, salaries, benefits, terms of employment, or other opportunities,1 laying the foundation for a more aggressive antitrust enforcement approach in labor markets. Mostly silence followed for years until late 2020, when DOJ brought its first criminal wage fixing case.2 DOJ quickly followed up with a number of other criminal no-poach actions against companies and their respective individual employees.
Trial losses
In April 2022, DOJ lost its first two wage fixing and no-poach cases. In Jindal, DOJ accused the former owner of a Texas health care staffing company and his clinical director of colluding with competitors to lower pay rates for physical therapists and physical therapist assistants. The defendants were ultimately acquitted at trial on the antitrust charges, although Jindal was found guilty of obstructing the underlying FTC investigation. In the second no-poach case, decided only a day after Jindal, a Colorado federal jury acquitted a health care company and its former CEO.3 These losses raised questions about the effectiveness of DOJ’s strategy and approach in criminally prosecuting wage fixing and no-poach cases, even under a per se theory of liability. Those losses, however, have not deterred DOJ.4
DOJ’s first victory
At the end of October 2022, DOJ finally secured its first no-poach victory with a corporate guilty plea.5 A Nevada grand jury indicated VDA, a Nevada health care staffing company that had colluded with a competitor not to recruit or hire each other’s nurses and not to raise the wages of their respective nurse employees. VDA said its no-poach agreement involved a single telephone conversation and one email between one of its employees and an employee of a competitor, both on the same day. As part of the plea agreement, VDA agreed to pay a criminal fine of $62,000, $72,000 in restitution to the affected nurses, and a $400 special assessment. VDA’s penalties, calculated via the applicable sentencing guidelines, were assessed based in part on the number of services affected by the violation during the relevant 10-month period, which totaled $218,016.
DOJ’s multi-year investigation and prosecution of VDA demonstrates its aggressive enforcement stance. Despite the relatively low number of services affected by that violation, resulting in low fines and restitution amounts, DOJ invested considerable time, effort, and resources in the investigation and prosecution of VDA’s conduct.6
Other risks
Individuals harmed by employment-related anticompetitive conduct may also bring civil antitrust lawsuits in the absence of or in addition to a guilty plea or verdict for criminal antitrust violations.7 Additionally, companies that have contracts with or provide services for the United States must be aware that a conviction can result in suspension or debarment by state and/or federal agencies. By their nature, plea agreements do not and cannot bind any other governmental agency other than the one making the agreement.8 Companies should carefully assess their options when considering taking a plea agreement and seek guidance from counsel.
Key takeaways and what’s next
All employers – regardless of size – need to understand that they enter into no-poach and wage fixing agreements at their peril. As DOJ continues its aggressive pursuit of no-poach and wage fixing criminal cases, further guidance from the courts may clarify the burden of proof, standard of review, and related factors in resolving these matters. In the meantime, there are a number of steps that companies should consider to mitigate antitrust risk in this area:
- Help your executives and key personnel understand what wage fixing and no-poach agreements are and how to stay clear of conduct that may spark an inquiry or investigation.
- Regularly remind employees that they can be held personally liable for antitrust claims such as those relating to wage fixing and no-poach agreements.
- Provide adequate training to HR employees and others on implementing safeguards to prevent inappropriate discussions or agreements with other firms seeking to hire the same employees.
- Regularly assess the scope and duration of any non-compete or non-solicitation provisions in employment and vendor contracts.
- Conduct a regular antitrust compliance training program. No-poach and wage fixing agreements should be addressed as part of that program, and HR and other employees involved in the hiring process should be included.
- Be aware of the content of merger documents, particularly those related to or discussing the labor market.
How we can help: In this era of heightened antitrust enforcement in labor markets, it is critical that companies work with experienced antitrust and labor and employment counsel to navigate the evolving issues. Please do not hesitate to contact Reed Smith’s labor and employment and antitrust and competition teams for further guidance or the Reed Smith lawyer with whom you regularly work.
- U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidance for Human Resource Professionals (Oct. 2016), available here.
- United States v. Jindal, et al., No. 4:20-cr-00358 (E.D. Tex. Apr. 11, 2022).
- US v. DaVita, No. 1:21-cr-00229 (D. Colo. Jul. 14, 2021).
- See Press Release, U.S. Dep’t of Justice, Former Health Care Staffing Executive Convicted of Obstructing FTC Investigation into Wage Fixing Allegations (Apr. 14, 2022), available here. (“Wage fixing causes tremendous hard to countless hardworking Americans […] The FBI will continue to work closely with our law enforcement partners to uncover this type of corruption and bring to justice anyone who is responsible or who obstructs our investigations into this conduct.”).
- VDA Plea Agreement, U.S. v. Hee, No. 2:21-cr-00098 (D. Nev. Oct. 27, 2022) (ECF 106).
- The case against individual defendant Ryan Hee remains ongoing.
- See Compl. Brown v. JBS USA Food Co., No. 22-cv-2946 (D. Colo. Nov. 11, 2022).
- See, e.g., VDA Plea Agreement at 14 (“The Defendant understands that it may be subject to suspension or debarment action by state or federal agencies other than the [“DOJ”] based on the conviction resulting from this Plea Agreement, and that this Plea Agreement in no way controls what action, if any, other agencies may take. The Defendant nevertheless affirms that it wants to plead guilty regardless of any suspension or debarment consequences of its plea.”).
Client Alert 2022-389
