DOJ Brings First Criminal Wage-Fixing Prosecution

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The Antitrust Division of the Department of Justice (“DOJ”) recently announced its first-ever criminal wage-fixing prosecution. The DOJ likely intends this case to be a wake-up call to companies, executives, and HR professionals, reinforcing that competition laws apply equally to wages paid to employees as they do to prices for goods and services. Companies and individuals should take note of this development, update their trainings and compliance programs as appropriate, and recognize that wage fixing could lead to federal criminal prosecution and even jail time.

The Facts

On December 10, 2020, the DOJ announced that a federal grand jury indicted the former owner of a therapist staffing company for participating in a wage-fixing conspiracy. The indictment alleges that Neeraj Jindal and his co-conspirators agreed to fix prices by lowering rates paid to healthcare workers. For approximately five months in 2017, according to the indictment, Jindal’s company paid lower rates to healthcare workers in connection with the conspiracy.

If established, a violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. Federal law provides for fines to exceed $1 million, depending on the value of the gain derived from the crime or the loss suffered by the victim. Companies can be criminally indicted for this kind of conduct as well, and they can face fines of up to $100 million or twice the gain or loss from the illegal agreement.

DOJ’s Position on Wage Fixing and Corporate Compliance

The indictment is the DOJ’s first criminal prosecution of wage-fixing conduct, but it was by no means a surprise. The DOJ announced in October 2016 that “naked” no-poach and wage-fixing agreements could face criminal prosecution going forward. In the more than four years since the announcement, DOJ officials have reiterated their intention to bring such cases in several speeches and other public statements, frequently acknowledging that several investigations into this type of conduct are ongoing. And, the DOJ and the FTC have brought civil enforcement actions into this type of conduct. Earlier this year, the DOJ and Federal Trade Commission released a joint statement explaining that antitrust enforcers were closely monitoring employer collusion to disadvantage workers, and frontline workers in light of the COVID-19 pandemic.

This development comes a year after the DOJ announced a policy to incentivize corporate compliance and published guidance on evaluating the effectiveness of corporate compliance programs in its charging decisions. Notably, in this context, the policy outlines nine factors that the DOJ will consider in its evaluation of a compliance program. One of these factors, the design and comprehensiveness of the program, takes into account the guidance that has been provided to employees who could flag potential antitrust violations, listing individuals with human resources/hiring authority as an example.

Takeaways:

  • The DOJ remains focused on enforcing antitrust violations involving employee and labor markets. It is important for companies to continue to keep in mind that human resource professionals in particular may be a source of antitrust liability with respect to wage-fixing or no-poach agreements and should be carefully trained accordingly.
  • Current DOJ and FTC antitrust enforcement priorities are not limited to Big Tech. While antitrust enforcement actions involving Big Tech have dominated the headlines recently, this indictment should serve as a reminder that antitrust enforcers will bring cases when they believe a violation has occurred, regardless of the industry.
  • The significance of this prosecution is broader than wage fixing. The DOJ published Antitrust Guidance for Human Resource Professionals in 2016 (the “Guidance”), which highlights areas of antitrust liability related to hiring and compensation decisions. The Guidance notes that agreements with competitors related to wages, salaries, or benefits, as well as so-called no-poach agreements, may violate antitrust laws. While Jindal’s indictment alleges illegal agreements related to wages, future indictments could allege illegal agreements over other aspects of compensation, such as benefits. The Guidance explains that collusion over seemingly inconsequential benefits like gym memberships or transit subsidies could be the subject of an antitrust violation.

Companies should take stock of their antitrust compliance programs and ensure that employee training covers hiring and compensation-related issues and is provided to appropriate personnel. Training should reinforce that competitors for purposes of hiring and paying employees are not limited to only companies in the same industry. Employees should closely guard confidential hiring and recruitment, compensation, salary, and benefits information. This is an opportunity for companies to ensure that they are well-positioned to detect and deter antitrust violations, and to benefit from the DOJ’s new policy of crediting effective compliance programs if a violation occurs.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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