A federal grand jury in Texas indicted the owner of a therapist staffing company on wage-fixing charges on December 9. Although this is the US Department of Justice’s first criminal wage-fixing prosecution, the indictment underscores that enforcement agencies remain focused on policing these types of anticompetitive agreements that restrict competition in labor markets.
For the past few years, the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) have focused on bringing enforcement actions relating to the anticompetitive effects on employee mobility and labor markets. In 2016, the two federal antitrust enforcement agencies jointly issued Antitrust Guidance for Human Resource Professionals (Guidance), in which they announced an intention to take a “very active” approach to reviewing wage-fixing and no-poach agreements.[1] The Guidance further cautioned that if the DOJ “uncovers a naked wage-fixing or no-poaching agreement, the DOJ may . . . bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies.”
Since the Guidance was issued four years ago, both agencies have brought civil enforcement actions involving wage-fixing and no-poach agreements, which we previously highlighted.[2] The DOJ has also intervened in private antitrust actions, filing statements of interest and entering into consent decrees.[3]
The DOJ had also initiated several criminal investigations into such conduct, but had not, as yet, brought a criminal charge. Until now.
On December 9, 2020, a federal grand jury in the US District Court for the Eastern District of Texas returned an indictment against Neeraj Jindal for conspiring with competitors to fix wages for physical therapists and physical therapist assistants in the Dallas-Fort Worth metropolitan area.[4] The DOJ alleges that over a six-month period from March 2017 to August 2017, Jindal exchanged nonpublic information with his co-conspirators about the rates paid to physical therapists and physical therapist assistants. The DOJ alleges that the goal of the conspiracy was to decrease the hourly rates they would pay, and that Jindal and his co-conspirators ultimately paid lower rates to therapists. The defendant previously resolved a civil enforcement action with the FTC for wage-fixing.[5] The indictment includes a second count for obstruction of proceedings alleging that Jindal “made false and misleading statements to the FTC and withheld and concealed information from the FTC” during that agency’s investigation.[6]
Though this is the first criminal wage-fixing prosecution, the indictment underscores that the enforcement agencies remain focused on policing these types of anticompetitive agreements that restrict competition in labor markets. Indeed, the DOJ has on several occasions reaffirmed its commitment to criminally prosecute naked no-poach and wage-fixing agreements, with Assistant Attorney General Makan Delrahim testifying before Congress last year that a focus on such agreements “remains a high priority for the Antitrust Division,”[7] and that “Defendants should anticipate potential criminal enforcement actions for any such naked no-poach agreements we uncover that post-date our October 2016 guidance.”[8]
With the impending change in administrations, it is expected that the focus on such agreements will heighten as the Biden administration has stated its intention 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.”[9]
The implications of the DOJ’s enforcement action for employers are profound: the indictment makes clear that the DOJ considers wage-fixing and naked no-poach agreements between employers to be per se violations of the Sherman Act, meaning that defendants cannot escape liability by seeking to explain or justify such agreements. The indictment further affirms the enforcement agencies’ intent to actively pursue both companies and individual participants in the conspiracy and to subject them to both criminal and civil liability. Given how common these agreements have historically been and that many may remain in place,[10] the indictment serves as a timely reminder that employers must adhere to the antitrust laws at all times, particularly in areas that do not directly affect consumer prices, such as employee salaries, retention, and benefits. Companies should continue to review their employment-related agreements, and remove or update any provisions that may implicate the Guidance with respect to no-poach and wage-fixing agreements. Companies should also reinforce through ongoing training and advisories that, absent clearance based on limited unique circumstances, employees should not communicate with any other companies (regardless of whether or not they are commercial competitors) concerning employee salaries, retention, benefits or other terms of employment.
As before, we will continue to monitor enforcement activity on the no-poach and wage-fixing agreements.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
San Francisco
Brian Rocca
Colin West
Boston
Siobhan E. Mee
Daniel S. Savrin
London
Omar Shah
New York
Stacey Anne Mahoney
Lincoln O. Brisbee
Philadelphia
Brendan Fee
Washington, DC
Clay Everett
Ryan Kantor
[1] Dep’t of Justice, Antitrust Div. & Fed. Trade Comm’n, Antitrust Guidance for Human Resource Professionals.
[2] See, e.g., DOJ’s First Enforcement Action for ‘No-Poaching’ Agreements Since the Landmark Antitrust Guidance for HR Professionals; FTC Brings First Wage-Fixing Enforcement Action Following Joint DOJ-FTC Human Resources Guidance.
[3] See Press Release, Antitrust Division, Dept’ of Justice, Justice Department Seeks to Intervene in Private Class Action to Enforce Prohibition on Unlawful “No-Poach” Agreements; see also Statement of Interest of the United States, In Re: Railway Industry Employee No-Poach Antitrust Litigation, No. 2:18-mc-00798-JFC (W.D. Pa. Feb. 8, 2019).
[4] Indictment, United States v. Neeraj Jindal, No. 4:20-CR-00358 (E.D. Tex. Dec. 9, 2020) (Doc. No. 1).
[5] For a summary, see FTC Brings First Wage-Fixing Enforcement Action Following Joint DOJ-FTC Human Resources Guidance.
[6] Indictment, United States v. Neeraj Jindal, No. 4:20-CR-00358 (E.D. Tex. Dec. 9, 2020) (Doc. No. 1).
[7] Makan Delrahim, Assistant Att'y Gen., Remarks at the Public Workshop on Competition in Labor Markets (Sept. 23, 2019); see also Brent Kendall, U.S. Targets Drug Pricing, No-Poach Deals for Antitrust Action in 2020, Wall St. J. (Jan. 15, 2020).
[8] Statement of Makan Delrahim, Assistant Attorney General, Antitrust Division, Dep’t of Justice, Before the Subcommittee on Regulatory Reform, Commercial and Antitrust Law Committee on the Judiciary U.S. House of Representatives, December 12, 2018.
[9] President-elect Joe Biden, The Biden Plan For Strengthening Worker Organizing, Collective Bargaining, And Unions.
[10] Matthew Perlman, Delrahim Says Criminal No-Poach Cases Are in the Works, Law360 (Jan. 19, 2018) (“I've been shocked about how many of these [agreements] there are, but they're real.”).