On 10 December 2020 the Antitrust Division of the US Department of Justice (DOJ) indicted an individual employer owner, for the first time, for agreeing with a competing owner to reduce the wages that their workers were being paid. Moreover, on 5 January 2021 the DOJ indicted a corporation for conspiring with two competing employers to allocate a medical employment market by agreeing not to solicit each other's senior employees.
These rapid-fire developments are of critical importance to all companies for several reasons. They represent an expansion of criminal enforcement on the buyer-side of the market. Until now, the DOJ's extensive criminal enforcement efforts have rarely attacked buyers' cartels and in a labour market the employers are buyers of services. Instead, the DOJ has concentrated its heavy criminal guns on competing sellers of goods or services which have allegedly agreed to raise prices or allocate customers or markets among themselves. It may be that buyers' cartels are much more unusual, harder to find, harder to prove or assumed to be less immediately damaging to consumers.
Second, these cases are a continuation of the enforcement priority focused on employment-related restraints that had resulted in the 2016 joint DOJ and Federal Trade Commission (FTC) Antitrust Guidance for Human Resource Professionals. This enforcement priority is unlikely to diminish under the new Biden administration.
Third, the cases confirm the DOJ's fascination with the buyer-side of the market. This has been most clearly seen in the healthcare and agricultural sectors, where there have been both governmental and private cases challenging purchasing activities in, among other things, health insurance, poultry and peanuts. Again, this is unlikely to change under the new Biden administration.
Fourth, the line between civil and criminal antitrust enforcement is something of which well-counselled companies should be mindful, because criminal enforcement comes with more severe consequences, including jail time for culpable executives. Both these cases fall within well-recognised indicia for antitrust criminal enforcement:
- the type of conduct had been treated as illegal per se in prior DOJ civil cases (in 2010);
- the DOJ had warned of its intent to prosecute criminally going forward (in 2016); and
- the wage-fixing defendant had conceded its wrongdoing (by obstruction of justice in 2017).
Finally, it is important to remember that the challenged activity in both cases was entirely different from the collective bargaining by employers authorised under the National Labour Relations Act – where employers and employees can each legally agree among themselves about how to deal with the other side. Absent the collective bargaining immunity, any wage-related agreement among enterprises is likely an illegal per se antitrust violation. Equally, any agreement among non-union employees to strike as a way of seeking higher wages is also likely a violation per se.
The original December 2020 case was small in economic terms. The indictment in United States v Neeraj Jindall charged the owner of a small physical therapy staffing company with conspiring with the owner of another staffing competitor to reduce the wages that they paid to physical therapists and physical therapy assistants in the Dallas-Fort Worth metropolitan area. The conspiracy lasted only approximately five to six months (from approximately March 2017 to approximately August 2017), but was well documented in text messages.
As Jindall is the first time that the DOJ has criminally charged an employer conspirator with an antitrust felony for price fixing on wages, parties can wonder what led to such aggressive enforcement. The defendant's actions likely forced the government's hand. This case started at the FTC, which began an investigation near the commencement of the alleged conspiracy in April 2017. For those (improperly) engaged in a horizontal conspiracy, this is usually good news since the FTC cannot bring a criminal case. However, the defendant took a dangerous path when it allegedly lied repeatedly to FTC staff about what was going on, followed by false testimony at an FTC investigational hearing (deposition) in September 2017.
Presumably, the FTC referred the case to the DOJ once this obstruction of justice was discovered. Once the DOJ had the case, it had ample and seemingly appropriate grounds for making history:
- the evidence of an intentional act of price fixing was readily available through text messages;
- the defendant had shown "guilty knowledge" through the obstruction of justice; and
- there was no question that the actions were part of legitimate labour negotiations.
The second case on 5 January 2021 involved larger employers and more sustained conspiracies. The indictment in United States v Surgical Care Affiliates, LLC charged a corporate multi-state operator of outpatient medical care facilities with illegal market allocation (which, like price fixing, is a Sherman Act offence per se which the DOJ routinely prosecutes criminally). The defendant was charged with entering into two separate conspiratorial agreements with corporate competitors "not to solicit each other's senior-level employees across the country". The first conspiracy allegedly started in 2010 and the second in 2012; both allegedly ended between July 2017 and October 2017.
The two cases may well be related. Both involved outpatient healthcare services and three charged conspiracies all allegedly ended within a three-month period in 2017. Moreover, both indictments were returned by grand juries sitting in the Eastern District of Texas. Parties can wonder whether additional indictments of executives or other companies will follow.
DOJ's limited prior enforcement efforts in employment markets
Historically, the DOJ's most notable prior challenge to employer-imposed restraints was its 2010 civil complaint attacking various bilateral Silicon Valley agreements among Adobe, Apple, Google, Intuit and Pixar. The complaint alleged that the defendants had agreed not to solicit each other's "specialized computer engineers and scientists" and that these agreements "were created and enforced by senior executives of each company". The result was a proposed settlement that the DOJ explained:
more broadly prohibits the companies from entering, maintaining, or enforcing any agreement that in any way that prevents any person from soliciting, cold calling, recruiting or otherwise competing for employees.
More recently, the DOJ challenged a no-poach agreement among two large rail airbrake manufacturers in a 2018 civil action.
Criminal indictments do not just appear out of thin air. Nearly all of them originate with a complainant or an informant. By bringing the Jindall and Surgical Care indictments, the DOJ has highlighted its interest in wage-fixing and no-poaching agreement criminal enforcement. Therefore, the DOJ is more likely to receive:
- complaints from aggrieved workers; and
- amnesty applications from uneasy co-conspirators.
The DOJ and the FTC also coordinate on new investigations to avoid overlaps and the DOJ may take a more active interest in exercising its criminal powers against suspected employer conspiracies that either agency otherwise surfaces.
The way in which amnesty works is both simple and effective. When a lawyer or client finds that their company is engaged in an undisclosed conspiracy, the company may obtain a complete pass from criminal liability and a more limited damages exposure if it goes to the DOJ and names its co-conspirators. This works. The amnesty programme has apparently become the DOJ's major source of antitrust indictments and plea bargains involving cartels large and small. However, a potential amnesty applicant has no incentive to report others to the DOJ unless it has some fear of being prosecuted itself – otherwise, silence is a safer course.
In announcing the Jindal indictment, the departing Assistant Attorney General for Antitrust Makan Delrahim offered a broad message:
The charges announced today are an important step in rooting out and deterring employer collusion that cheats American workers – especially health care workers – of free market opportunities and compensation… Employers who conspire to fix wages of workers or restrict their mobility by allocating labor markets will be prosecuted to the fullest extent of the law.
This seems a message that the incoming Biden administration will warmly embrace – to the extent that it can find – more cases under its amnesty programme or otherwise. Protecting workers' wages is a politically attractive area to make a visible enforcement effort and the DOJ has strong criminal weapons which the FTC lacks.
In sum, the otherwise minor Jindall indictment may become an enforcement landmark rather than a one-off exception. Having escalated employer restraints into the criminal arena, the DOJ should become a source of antitrust concern among well-counselled employers of non-unionised workers. They must be more careful than ever to avoid anything that could be deemed to be a horizontal agreement to restrict wage levels or employee mobility for new or current employees.
