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The Department of Justice Antitrust Division Brings First-Ever Criminal Labor Market Collusion CaseDecember 17, 2020
Last week, the Antitrust Division of the Department of Justice (“DOJ”) announced its first-ever criminal wage-fixing case, signaling a more active role for the agency in criminal enforcement of antitrust violations in labor markets. On December 9, 2020, a federal grand jury in the Eastern District of Texas indicted Neeraj Jindal, the former owner of a therapist staffing company, for allegedly participating in a conspiracy to lower the rates paid to physical therapists and physical therapist assistants in north Texas. Jindal was charged with one count of price fixing in violation of Section 1 of the Sherman Act and one count of Obstruction of Justice under 18 U.S.C. Section 1505. The indictment alleged that between March and August 2017, Jindal texted the owners of various competing therapist staffing companies seeking their agreement to lower wages, secured an agreement, and subsequently paid lower rates for certain physical therapists and physical therapist assistants. In addition, the indictment alleges that Jindal sought to obstruct a Federal Trade Commission (“FTC”) investigation into the alleged wage fixing by making false and misleading statements to and withholding and concealing information from the FTC.
The indictment represents a significant step for DOJ involvement in antitrust enforcement in labor markets. In 2016, the DOJ and FTC jointly released the Antitrust Guidance for Human Resources Professionals, in which they stated for the first time that they intended to treat “naked” agreements restraining wages as per se violations of the antitrust laws subject to criminal enforcement. Since that time, the DOJ has repeatedly stressed its willingness to use antitrust laws to challenge anticompetitive conduct in labor markets, including its intent to criminally prosecute “naked” labor market violations. On April 13, 2020, the DOJ and FTC issued a joint statement stressing that they are closely monitoring employers, staffing companies, and recruiters who engage in wage-fixing and no-poaching agreements, particularly for front-line workers during the COVID-19 crisis, stating that “[c]ompanies and individuals who enter into unlawful wage-fixing and no-poach agreements may be criminally prosecuted[.]” Similarly, in a Spring 2019 Update, the DOJ emphasized that it “protects labor markets and employees by actively investigating and challenging unlawful no-poach and wage-fixing agreements between employers,” signaling that it intends to put employers on notice of heightened scrutiny in this area. Consistent with this focus, the DOJ has filed numerous statements of interest in civil wage-fixing and no-poach cases, emphasizing the anticompetitive effects of such agreements and advocating for a stricter review.
Importantly, as the Antitrust Guidance for Human Resources Professionals recognizes, not all agreements between employers are per se illegal. Agreements that are reasonably necessary to a larger legitimate collaboration or joint venture between the employers may be pro-competitive and lawful. Similarly, exchanges of information between competitors about terms and conditions of employment can be designed and carried out in ways that conform with the antitrust laws. Information gathering may also be lawful if it is in connection with a legitimate merger or acquisition and appropriate precautions are taken.
The DOJ may have decided to make Mr. Jindal’s case the first wage-related criminal antitrust prosecution because it is allegedly about a simple agreement to reduce wages, similar in form to traditional price fixing. It remains to be seen whether the DOJ will bring a criminal no-poach prosecution. Such agreements historically have been treated as a civil violation and evaluated under the rule of reason. Ultimately, a court will determine whether rule of reason or per se treatment is appropriate. The DOJ may have avoided that debate given the nature of the alleged violation in Mr. Jindal’s case—a straightforward buy-side agreement among horizontal competitors on the price of labor.
Antitrust enforcers’ interest in labor markets is likely to continue under the incoming administration. As a candidate, President-Elect Biden specifically called for the elimination of “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.” Antitrust reformers are also advocating for consideration of labor market effects in merger reviews.
Employers should be mindful of the potential antitrust risk involved in communications with competitors about wages or terms of compensation, no-poach agreements, and non-compete agreements. O’Melveny has robust antitrust and labor and employment practices and is prepared to assist clients in navigating this evolving legal landscape.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ben Bradshaw, an O’Melveny partner licensed to practice law in California and the District of Columbia, Ian Simmons, an O’Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, Riccardo Celli, an O’Melveny partner licensed to practice law in the Capital Region of Brussels, the Law Society England & Wales, and Roma, Courtney Dyer, an O’Melveny partner licensed to practice law in the District of Columbia and New York, Andrew Frackman, an O’Melveny partner licensed to practice law in New Jersey and New York, Philip Monaghan, an O’Melveny partner licensed to practice law in the Capital Region of Brussels, Hong Kong, the Law Society England & Wales, and the Law Society Ireland, Anna T. Pletcher, an O’Melveny partner licensed to practice law in California, Katrina Robson, an O’Melveny partner licensed to practice law in California and the District of Columbia, Michael Tubach, an O’Melveny partner licensed to practice law in California and the District of Columbia, Courtney C. Byrd, an O’Melveny counsel licensed to practice law in the District of Columbia and Maryland, Stephen McIntyre, an O'Melveny counsel licensed to practice law in California, Sergei Zaslavsky, an O’Melveny counsel licensed to practice law in the District of Columbia and Maryland, and Laura Kaufmann, an O’Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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