Juries in Texas and Colorado dealt rare losses to the Antitrust Division of the Department of Justice (DOJ) in its effort to ramp up antitrust enforcement in so-called “labor markets,” i.e., the competition for recruiting and retaining employees, specifically regarding purported agreements among companies to fix employee wages or not to solicit or hire certain employees (no-poach agreements). On April 14, 2022, in United States v. Jindal, a jury in the Eastern District of Texas found two defendants not guilty of violating antitrust laws by agreeing with competitors on the wages they would pay their employees. The next day, DaVita, Inc. and its former CEO were found not guilty by a District of Colorado jury of violating the antitrust laws by engaging in employee no-poach agreements.
DOJ warned employers in its 2016 Antitrust Guidance for Human Resource Professionals of its ability and intention to bring criminal charges against employers for agreeing to fix wages or enter into no-poach agreements. Specifically, the FTC and DOJ foreshadowed that DOJ “intends to proceed criminally against naked wage-fixing or no-poaching agreements.” Generally, “naked” no-poach agreements are agreements with bans on hiring or soliciting employees, and which are not ancillary to or justified by an otherwise proper joint effort or enterprise. According to the Guidance, these arrangements also commonly include wage-fixing agreements that “rob employees of labor market competition [and] deprive them of job opportunities, information and the ability to use competing offers to negotiate better terms of employment.” More recently, the Biden administration emphasized its intention to protect workers from agreements among employers to fix wages or enter into no-poach agreements.
Beginning with the December 2020 indictment in the Jindal case, DOJ started to follow through on its commitment to criminally prosecute anticompetitive conduct in labor markets. With the Jindal indictment, and those that followed, DOJ had, for the first time, viewed certain conduct by employers as per se violations of the antitrust laws and brought criminal charges against defendants. These indictments generally fall into two categories: (1) those that allege that employers engaged in price-fixing by colluding to fix the wages paid to workers, and (2) those that allege that employers engaged in illegal market allocation by entering into naked no-poach agreements with other employers. Both price-fixing and market allocation are traditionally considered per se violations of the antitrust laws but historically applied to products, not employees. But, DOJ has pushed this boundary in this recent prosecutions, and advanced an argument that employers are competitors in the market for labor, even where employers might not compete for the sale of goods or services.
The Jindal and DaVita matters were just the start of DOJ’s recent practice of using criminal indictments to punish entities and individuals for colluding with other parties on hiring, wages, or other conditions of employment. Since the Jindal indictment in December of 2020, DOJ has indicted numerous defendants, alleging wage-fixing and labor-market allocation.1 Most recently, on January 28, 2022, DOJ indicted four managers of home healthcare agencies for both wage-fixing and market allocation.2
In United States v. Jindal et al., DOJ alleged that defendant – the owner and clinical director of a therapist staffing company – conspired with other staffing companies to artificially fix the pay rates of therapists. In December of 2021, DOJ’s prosecution survived a motion to dismiss, with the court holding that wage-fixing is a form of price-fixing and can therefore be considered a per se antitrust violation.
Seven months after the Jindal indictment, DOJ indicted DaVita and its former CEO, Kent Thiry, for conspiring with competitors not to solicit senior employees. Like Jindal, the DaVita case was the first of its kind, as DOJ had never brought to trial a criminal prosecution of an agreement not to solicit or hire employees.3 And, as in Jindal, the DaVita indictment survived a motion to dismiss. The DaVita court ruled that the defendant’s purported naked no-poach conspiracy constituted horizontal market allocation, and the indictment therefore alleged per se anticompetitive conduct, paving the way for the criminal case to proceed.
Although both the Jindal and DaVita indictments survived motions to dismiss, DOJ, in the span of two days, lost both cases at trial. On April 14, 2022, a jury found the two defendants in Jindal not guilty of the alleged Sherman Act violations, and, the following day, a jury exonerated the defendants in DaVita.4 The defense prevailing in both DOJ’s first criminal wage-fixing and employee no-poach cases may be a sign that it will be difficult to convince juries of the merits of DOJ’s employment-related antitrust prosecutions. Juries may not consider this conduct as egregious as more “traditional” per se violations of the antitrust laws, such as bid-rigging or price-fixing. On the heels of Jindal and DaVita, defendants who find themselves targeted by DOJ in similar matters could be empowered to take their chances with the jury rather than accept a plea.
DOJ, for its part, is likely to continue to aggressively enforce the antitrust laws against what it sees as illegal agreements affecting employees. “In no way should the verdict today be taken as a referendum on the Antitrust Division’s commitment to prosecuting labor market collusion,” a DOJ official said following the Jindal verdict.5 Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division stated in a Press Release issued by DOJ, “Wage fixing causes tremendous harm 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.”6
Companies and individuals should be aware that DOJ remains keen on rooting out what it sees as collusion with respect to the hiring and retention of employees and/or the wages companies pay their employees. Agreements among companies or individuals not to pay employees above a certain rate will continue to be treated as criminal antitrust violations. Likewise, DOJ has shown that it will view naked agreements among companies or individuals not to solicit or hire employees of the other company as criminal violations.
DOJ considers companies to be participants in a market for employee labor, such that it does not matter that the companies do not compete in products or services. Agreements to fix wages are treated by DOJ as per se price-fixing, and agreements not to solicit or hire certain employees are treated as a per se allocation of the market of available workers. Regardless of DOJ’s recent losses at trial, courts have consistently held, at least at the motion to dismiss stage, that the government’s legal approach on these issues is sound. And, with additional cases in the pipeline, the Jindal and DaVita verdicts may yet prove to be the outliers.
It is critical that companies review any agreements with third parties that contain restrictions on the hiring or solicitation of employees to assess whether those arrangements could be considered naked no-poach agreements illegal under the antitrust laws, or if they are legitimate, ancillary agreements. And companies should never enter into agreements with other companies to fix the wages it will pay employees. Compliance officers and in-house counsel should also be sure to clearly communicate expectations throughout the organization so that those responsible for hiring and contracting are aware of DOJ’s aggressive posture. Additionally, companies should counsel all employees to avoid discussions with third parties regarding wages or hiring practices.
- Indictment of a limited liability entity that is the operator of outpatient medical centers (Jan. 7, 2021) (see https://www.justice.gov/opa/pr/health-care-company-indicted-labor-market-collusion); a health care staffing company and its former manager (March 30, 2021) (see https://www.justice.gov/opa/pr/health-care-staffing-company-and-executive-indicted-colluding-suppress-wages-school-nurses); a former CEO of outpatient medical care centers (July 15, 2021) (see https://www.justice.gov/opa/pr/davita-inc-and-former-ceo-indicted-ongoing-investigation-labor-market-collusion-health-care); six aerospace executives (Dec. 10, 2021)(see https://www.justice.gov/opa/pr/six-aerospace-executives-and-managers-indicted-leading-roles-labor-market-conspiracy-limited).
- United States v. Faysal Kalayaf Manahe, et al. (January 27, 2022) (see https://www.justice.gov/atr/case/us-v-faysal-kalayaf-manahe-et-al).
- DOJ brought its first indictment based on an agreement not to hire or solicit employees in January of 2021 in the related case, Unites States v. Surgical Care Affiliates, LLC and SCIA Holdings, LLC. Defendants in that matter are alleged to have conspired with DaVita and Thiry. That case has not yet proceeded to trial.
- The jury in Jindal found defendant Jindal guilty of one count of obstruction of Federal Trade Commission proceedings.
- Ben Penn, “DOJ’s First Criminal Wage-Fixing Case Ends Mostly in Defeat,” Bloomberg Law (Apr. 14, 2022).