A series of significant recent developments highlight the continuing enforcement by the US Department of Justice Antitrust Division, Federal Trade Commission, and state attorneys general regarding no-poaching and wage-fixing agreements, with more enforcement actions and private lawsuits expected in the near future.
On July 31, 2018, the Federal Trade Commission (FTC) announced a proposed settlement with a therapist staffing company accused of colluding with other therapist staffing companies to set compensation paid to physical therapists at a reduced amount. The FTC alleged that these companies colluded to fix wages for the purpose of preventing individual therapists from seeking higher compensation at other therapist staffing companies, with the ultimate effect of increasing the companies’ profits.
This enforcement action is the first by the FTC in connection with a wage-fixing agreement following its 2016 joint guidance with the US Department of Justice Antitrust Division (DOJ), summarized below, in which both federal agencies announced that they plan to bring enforcement actions for no-poaching and wage-fixing agreements.
The DOJ and FTC define a wage-fixing agreement as any express or implied agreement or understanding among competitors “about employee salary or other terms of compensation, either at a specific level or within a range.” Significantly, in the wage-fixing space, the relevant market is all firms that compete to attract or retain employees or independent contractors, regardless of industry.
The proposed consent order prohibits the therapist staffing company from agreeing to fix wages or sharing compensation information with other firms, requires the submission of periodic compliance reports to the FTC, and authorizes the FTC to inspect the company premises and conduct interviews to determine compliance. Notably, the proposed consent order includes no restitution or notice to the victims of the wage-fixing scheme, nor does it include any admission of facts or liability by the therapist staffing company. Due to the structure of the proposed consent order, FTC Commissioner Rohit Chopra issued a statement requesting public comment on the content and structure of wage-fixing agreement consent orders going forward. After a 30-day public comment period, the FTC will decide whether to finalize the proposed consent order.
The FTC’s enforcement action reflects an ongoing effort by the DOJ and FTC to prosecute no-poaching and wage-fixing agreements following the agencies’ joint issuance of their Antitrust Guidance for Human Resources Professionals (Antitrust HR Guidance) in October 2016. The DOJ and FTC clarified in the Antitrust HR Guidance that naked wage-fixing and no-poaching agreements would be treated as per se antitrust violations, and the DOJ further indicated for the first time that it intended to pursue criminal penalties for naked violations. In a series of LawFlashes, we have previously commented on and summarized the antitrust issues and criminal and civil implications of the Antitrust HR Guidance, both within the United States and internationally.
Besides the recent DOJ and FTC enforcement actions, state attorneys general have initiated investigations and enforcement actions in this area. To date, the firms targeted by these state attorneys general have been fast-food franchises that use no-poaching agreements to prevent employees from moving to or transferring between stores within the same franchise.
For example, on July 9, 2018, Massachusetts Attorney General Maura Healey, on behalf of the attorneys general of 10 states and the District of Columbia, announced an investigation of eight major fast-food franchises for their use of no-poaching agreements. According to these attorneys general, 80% of major fast-food franchisors include no-poaching provisions in their franchise agreements that prohibit an employee of the franchise from moving to a different store within the same franchise. Pursuant to the investigation, fast-food franchises have been asked to provide information and documents to state regulators regarding topics such as the number and categories of employees subject to the agreements, the temporal and geographic scope of the agreements, and the business reasons for why such agreements are necessary.
A few days later, on July 12, 2018, Washington Attorney General Bob Ferguson announced a settlement with seven major fast-food franchises that agreed to stop their use of no-poaching agreements for all their employees nationwide, affecting more than 25,000 stores. These fast-food companies agreed to waive the enforcement of no-poaching provisions in preexisting agreements and to remove no-poaching provisions from any future contracts. We expect that state attorneys general will continue to pursue no-poaching violations aggressively.
No-poaching agreements have also drawn scrutiny from some members of Congress. For example, Senators Cory Booker (D-NJ) and Elizabeth Warren (D-MA) recently issued letters to various franchise CEOs expressing concern about the use of no-poaching agreements. These letters came on the heels of a bill that Senators Booker and Warren introduced in the Senate earlier this year to prohibit the use of no-poaching agreements.
Finally, following the state attorneys general investigations, some employees have filed private class action or individual suits against employers, seeking treble damages for alleged antitrust violations. For example, following Washington’s settlement with fast-food franchises, former employees brought class action complaints against several of the franchises alleging antitrust and unfair competition claims. The complaints allege that each franchise engaged in a longstanding conspiracy to reduce employee wages by agreeing not to solicit employees from other stores within the same franchise.
Based on this recent activity, we anticipate that there will be a wave of private actions in the near future regarding no-poaching and wage-fixing agreements as government regulators begin to announce investigations and enforcement actions.
Morgan Lewis has assisted companies in the following areas to assess, address, and mitigate antitrust risk.
If you have any questions about the Antitrust HR Guidance, Morgan Lewis has a task force of experienced antitrust and labor and employment counsel who have been assisting companies and organizations with investigations by government regulators involving no-poaching and wage-fixing issues. For more information on these issues, please contact any of the following Morgan Lewis lawyers:
Mark L. Krotoski
Debra L. Fischer
Stacey Anne Mahoney
 Press Release, FTC, Therapist Staffing Company and Two Owners Settle Charges That They Colluded on Rates Paid to Physical Therapists in Dallas/Fort Worth Area (July 31, 2018).
 Antitrust HR Guidance for Human Resources Professionals, at 3 (Oct. 2016).
 Id. at 2.
 See supra note 1.
 Antitrust HR Guidance, at 1.
 Id. at 3-4.
 Morgan Lewis, LawFlash: DOJ’s First Enforcement Action for “No-Poaching” Agreements Since the Landmark Antitrust Guidance for HR Professionals (Apr. 12, 2018); Morgan Lewis, LawFlash: DOJ Antitrust Division Announces Imminent Criminal Prosecution for “No Poaching” Agreements (Feb. 6, 2018); see also Morgan Lewis, LawFlash: Are Your Employment Practices in Breach of Antitrust Law? (Mar. 30, 2018); Morgan Lewis, LawFlash: FTC and DOJ Issue Antitrust Guidance for HR Professionals (Nov. 1, 2016).
 Press Release, AG Healey Leads Multistate Investigation of Worker No-Poach Agreements at National Fast Food Franchises (July 9, 2018).
 See id.
 Press Release, AG Ferguson Announces Fast-Food Chains Will End Restrictions on Low-Wage Workers Nationwide (July 12, 2018).
 Letter from Sens. Cory Booker and Elizabeth Warren to Various CEOs (July 12, 2018).
 End Employer Collusion Act, S. 2480, 115th Cong., 2d Sess. (2018).
 See Harris v. CJ Star, LLC et al., No. 18-247 (E.D. Wash. filed Aug. 3, 2018); Richmond v. Bergey Pullman, Inc. et al., No. 18-246 (E.D. Wash. filed Aug. 3, 2018); Stigar v. Dough Dough Inc. et al., No. 18-244 (E.D. Wash. filed Aug. 3, 2018); Yi v. SK Bakeries, LLC, No. 18-5627 (W.D. Wash. filed Aug. 3, 2018).
 See, e.g., Complaint, Harris, No. 18-247 (E.D. Wash. filed Aug. 3, 2018) (ECF No. 1), ¶¶ 10-16.
 See generally LawFlash: DOJ Antitrust Division Announces Imminent Criminal Prosecution for “No Poaching” Agreements (Feb 6, 2018).
 Antitrust HR Guidance, at 8-9.
 Id. at 4-5.