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On December 10, a grand jury issued a criminal indictment on charges brought by the Antitrust Division of the U.S. Department of Justice (DOJ) for wage fixing, making it the first criminal wage fixing indictment. The indictment charges Neeraj Jindal, former owner of a therapist staffing company, with agreeing with at least one other company to lower the pay rate of in-home physical therapists and physical therapy assistants in the Dallas-Fort Worth area and inviting four other companies to lower pay rates as well. The indictment also charges Mr. Jindal with obstructing the Federal Trade Commission’s (FTC) prior investigation by making false and misleading statements to the FTC during investigational hearings (similar to a deposition), via email, and by submitting false and misleading documents. The penalties include imprisonment, fines or both.1

The DOJ’s case originated as a FTC civil investigation into Mr. Jindal and Sheri Yarbray, owner of a competing physical therapist staffing company. The FTC entered into a settlement with Mr. Jindal and Ms. Yarbray in late 2019, which prohibited them from any future wage fixing or exchange of competitively sensitive information. The FTC has only civil jurisdiction and cannot impose punitive civil penalties. It can only impose a penalty if an order is violated. In addition, the FTC stated that it had found no evidence that pay rates had actually been lowered, so it could not order restitution of pay to any employees. The FTC can, however, refer matters to the DOJ’s Antitrust Division, which has criminal jurisdiction, which appears to be the case here. 

Because simply agreeing to lower pay rates is per se illegal as a violation of the Sherman Act, the DOJ did not need to find any actual harm in the form of lower pay rates to the therapists or assistants in order to charge Mr. Jindal. Indeed, the indictment lists much of the same conduct that the FTC’s original complaint cited. And, although the indictment uses “Individual 1” and “Company B” to refer to the competing company with which Mr. Jindal agreed, cross-referencing to the FTC’s complaint, the indictment is likely referring to at least Ms. Yarbray and her company. The next major step for Mr. Jindal is either a trial or plea deal.

In addition, related to antitrust in labor markets, the DOJ has been active in no-poach cases. In November 2020, the DOJ filed an amicus brief in Aya Healthcare Services, Inc. v. AMN Healthcare, Inc., a case on appeal to the Ninth Circuit, stating that a provision barring Aya Healthcare from offering employment to medical staff employed by AMN Healthcare should be reviewed as an illegal contractual agreement in violation of the Sherman Act under the per se standard. In its brief, the DOJ stated “Just as an agreement among competing sellers to allocate customers eliminates competition for those customers, an agreement among competing employers to allocate employees eliminates competition for those employees.” In contrast to the Jindal indictment, the District Court in California used the “rule of reason” approach in evaluating the alleged no poach agreement, which requires proof of anticompetitive harm. The DOJ is advocating that the Ninth Circuit use the per se standard, which does not require proof of anticompetitive harm. As we reported in April, the DOJ and FTC issued a joint statement cautioning employers against taking advantage of the COVID-19 crisis by colluding with competitors on hiring, wages, or other conditions of employment and that, over the next several months, DOJ and FTC will be keeping a close eye on companies that “prey on working Americans by subverting competition in labor markets.” This amicus brief by the DOJ, and the wage fixing indictment, is evidence that the DOJ is not backing down from keeping its focus on anticompetitive conduct that affects employees.

Takeaways:

  • DOJ has made good on its promise in its 2016 Antitrust Guidance for Human Resources Professionals to criminally charge illegal agreements affecting labor. While a criminal charge for violating the antitrust laws is not unusual in price fixing cases, this is the first indictment for wage fixing.
  • DOJ continues to take a rigid stance on no-poach agreements. Its amicus brief in Aya Healthcare is in line with its position in the 2019 case Seaman v. Duke University, where it intervened and similarly advocated for the per se standard for no-poach agreements.
  • Although Mr. Jindal and the competing company allegedly agreed to lower rates, simply exchanging wage information, even without an agreement, can be a violation of antitrust laws because current and future wage and salary information is considered competitively sensitive.
  • There may be more referrals from the FTC to DOJ in labor market cases given the DOJ’s criminal jurisdiction and the success in this matter.
  • In the wake of COVID-19, companies may be looking for ways to maintain profits, but they need to be mindful that doing so by agreeing to lower wages, exchanging competitively sensitive information or taking actions that prevent employees from moving companies may result in antitrust liability.
  1. The penalty for wage fixing is imprisonment for not more than 10 years, a fine not to exceed $1 million, or both; and supervised release of not more than 3 years, with a special assessment of $100. The penalty for obstruction of the FTC’s investigation is imprisonment for not more than 5 years, a fine not to exceed $250,000, or both; and supervised release of not more than 3 years, with a special assessment of $100.