News Detail Banner
All News & Events

Antitrust & Competition Update - July 2022

Firm News

Labor Market Restrictions Remain in DOJ Crosshairs

The US DOJ Antitrust Division has recently reaffirmed its long-stated intention to proceed criminally against naked wage-fixing and no-poaching agreements. That remains, despite the recent acquittals in its first two jury trials of these types of criminal charges.

According to the US antitrust agencies, competitors are likely violating the antitrust laws if they agree to fix wages to employees (“wage-fixing”), or to not solicit or hire each other’s employees (“no-poaching”). DOJ & FTC, Antitrust Guidance for Human Resource Professionals 3 (Oct. 2016). The agencies’ position is that naked wage-fixing or no-poaching agreements are per se illegal, that is, illegal without consideration of any procompetitive efficiencies. Id. at 3. Agreements among competitors are “naked” if they are separate from or not reasonably necessary to a larger legitimate collaboration among them. Id. In contrast, in the agencies’ view, legitimate joint ventures are not considered per se illegal under the antitrust laws. Id.

Over the years, the DOJ has shifted to a more aggressive policy toward these types of naked agreements. In October 2016, the DOJ announced the shift: “Going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements.” Id. at 4. The Biden administration has subsequently supported this policy. During the campaign, the Biden Plan sought to “[e]liminate non-compete clauses and no-poaching agreements that hinder the ability of employees to seek higher wages, better benefits, and working conditions by changing employers.” The Biden Plan for Strengthening Worker Organizing, Collective Bargaining, and Unions. In July 2021, President Biden issued an Executive Order seeking, among other things, “[t]o better protect workers from wage collusion” and “[t]o address agreements that may unduly limit workers’ ability to change jobs”. Executive Order on Promoting Competition in the American Economy (July 9, 2021).

Pursuant to this policy shift since 2016, the DOJ obtained its first wage-fixing criminal indictment, which was of the former owner of a physical therapist staffing company, in December 2020. U.S. v. Jindal, Case No. 4:20-cr-00358 (E.D. Tex.). The DOJ obtained its first no-poaching criminal indictment, which was of a healthcare company and a related entity, in January 2021. U.S. v. Surgical Care Affiliates, LLC, Case No. 3:21-cr-00011 (N.D. Tex.). The DOJ obtained a related no-poaching criminal indictment of another healthcare company and its former CEO in July 2021. U.S. v. DaVita Inc., Case No. 1:21-cr-00229 (D. Colo.).

In all three cases, the defendants moved to dismiss the indictments, arguing that there is no due process or fair notice because there is no judicial precedent holding that wage-fixing or no-poaching agreements are per se illegal and therefore subject to criminal prosecution. In Surgical Care Affiliates and DaVita, the US Chamber of Commerce filed an amicus brief arguing these grounds and that the DOJ’s policy shift violates separation of powers by usurping the power of the judiciary and legislature to decide what types of agreements are per se illegal and therefore subject to criminal prosecution.

In two of these cases, the courts denied the motions on these grounds. In Jindal, on November 29, 2021, the court concluded that the wage-fixing agreement alleged in that case, if proven, would amount to price-fixing among competitors, which is an existing category of per se illegal agreement recognized in the case law. In DaVita, on January 28, 2022, the court concluded that the no-poaching agreement alleged in that case, if proven, would amount to a means of market allocation among competitors, which is another existing category of per se illegal agreement. In Surgical Care Affiliates, the motion to dismiss is still pending.

While the courts denied the motions, a Texas federal jury found the defendants not guilty of the wage-fixing charges in Jindal on April 14, 2022, and the next day, a Colorado federal jury found the defendants not guilty of the no-poaching charges in DaVita. Only Mr. Jindal was found guilty, on an obstruction charge that did not require proof of an antitrust violation.

Despite the acquittals, the DOJ has confirmed its commitment to pursuing these criminal antitrust cases. The DOJ has publicly stated that it is actively pursuing nearly 20 criminal antitrust cases, including Surgical Care Affiliates; a wage-fixing and no-poaching case against a health care staffing company and its former regional manager, U.S. v. Hee, Case No. 2:21-cr-00098 (D. Nev.); a wage-fixing and no-poaching case against four owners or operators of home health care agencies, U.S. v. Manahe, Case No. 2:22-cr-00013 (D. Me.); and a no-poaching case against a former manager of a major aerospace engineering company and five current and former executives of outsource engineering suppliers, U.S. v. Patel, Case No. 3:21-cr-00220 (D. Conn.). Several of these indictments were followed by private class action litigation. In order to pursue these and other matters, the Biden administration has sought $88 million in new funding for the DOJ Antitrust Division in 2023.

After the verdicts, Jonathan Kanter, Assistant Attorney General of the DOJ Antitrust Division, stated the need for the DOJ to strengthen its resolve in bringing these kinds of cases, if righteous, even if difficult, valuing court decisions finding these cases legally sound, and public demand for more of these cases, over jury verdicts in individual cases. Other DOJ officials have expressed similar sentiments. Companies and individuals engaged in these kinds of agreements should anticipate the risk of further criminal prosecution by the DOJ and class actions by private plaintiffs.