Update on DOJ “No-Poach” and “Wage-Fixing” Criminal Antitrust Prosecutions

Wilson Sonsini Goodrich & Rosati

Wilson Sonsini Goodrich & Rosati

It has been nearly a year since the U.S. Department of Justice's Antitrust Division (DOJ) made good on its promise to criminally charge companies that agree not to solicit each other's employees in so-called "no-poach" agreements or that agree not to compete on wages or salaries in so-called "wage-fixing" agreements.1 Since bringing its first criminal charges, the DOJ has reinforced its message that it will criminally prosecute collusion that affects U.S. labor markets by bringing charges against several other companies and individuals for alleged no-poach and wage-fixing agreements. In another recent development, a federal district court in Texas held for the first time that wage-fixing is a per se violation of the Sherman Act that can be prosecuted criminally.2

The court's decision was a result of the first criminal wage-fixing case brought by the DOJ under the Sherman Act. In December 2020 and April 2021, the DOJ charged two employees of a Texas-based healthcare staffing company, Neeraj Jindal and John Rodgers, with criminal wage-fixing for conspiring with another staffing company to share non-public pay rates for physical therapists and physical therapist assistants, and agreeing to decrease those rates.3 Jindal and Rodgers filed motions to dismiss the charges, arguing that wage-fixing should not be prosecuted criminally under the Sherman Act, because no court had ever found wage-fixing to be a criminal violation of antitrust law.

However, on November 29, 2021, the U.S. district judge denied Jindal and Rodgers' motions to dismiss the indictment and held that wage-fixing is a per se violation of U.S. antitrust law that can be prosecuted criminally.4 The judge ruled without oral argument on the motions. In his opinion, the judge wrote that "'price fixing' has not been limited to conduct that literally directly 'fix[es] … the price of a commodity'…Instead… the definition of horizontal price-fixing agreements cuts broadly. As such, any naked agreement among competitors—whether by sellers or buyers—that fixes components that affect price meets the definition of a horizontal price-fixing agreement."5 The judge explained that "price-fixing agreements come in many forms and include agreements among competing buyers of services."6 He concluded that "an agreement to fix the price of labor is 'tantamount' to an agreement to fix prices, and 'thus falls squarely within the traditional per se rule against price fixing.'"7

While Jindal was a decision about wage-fixing among employers in the labor market, a court has yet to decide whether the DOJ can prosecute a no-poach agreement criminally as a per se violation of the Sherman Act. To date, the DOJ has brought criminal charges in three no-poach cases, beginning with the first indictment in January 2021 charging Surgical Care Affiliates (SCA) with violating the Sherman Act by entering into a no-poach agreement with two other companies not to solicit each other's senior-level employees.8

A second case filed in March 2021 charged Ryan Hee and Advantage On Call (now VDA) with participating in a conspiracy to fix nurses' wages and not compete for nurses.9 The third case, which was indicted in July 2021, charged DaVita, Inc. and its former CEO Kent Thiry with agreeing with other healthcare companies not to solicit each other's senior-level employees.10

The companies and individuals charged in all three no-poach cases filed motions to dismiss the charges. Recently, oral arguments were held in two of those cases, Hee and VDA, and DaVita and Thiry. In both cases, the defendants argued that the charges should be dismissed, because there has not been a consensus among the courts in civil cases that an agreement between companies not to solicit or hire each other's employees is anticompetitive under the Sherman Act. On the other hand, the government asserted that agreements between employers not to affirmatively solicit or hire each other's employees are per se unlawful because they constitute (labor) market allocation.

The motions to dismiss are pending in all three cases, so it remains to be seen if and when a court will decide that a no-poach agreement is a per se violation of the Sherman Act that can be prosecuted criminally. However, the court in Jindal clearly held that wage-fixing is a form of price fixing that the DOJ can prosecute as a criminal violation of the Sherman Act. As a result, companies should reexamine their compliance programs to ensure they address and prevent collusive behavior that could restrict the recruiting, solicitation, hiring, or compensation of employees. In addition, companies should encourage all employees involved in hiring and recruiting to review and familiarize themselves with the Antitrust Guidance for Human Resource Professionals published jointly by the DOJ and FTC in October 2016.11

[1] See Wilson Sonsini Alert, “DOJ Brings First Criminal ‘No Poach’ and ‘Wage-Fixing’ Antitrust Prosecutions” (Jan. 8, 2021), https://www.wsgr.com/en/insights/doj-brings-first-criminal-no-poach-and-wage-fixing-antitrust-prosecutions.html

[2] United States v. Jindal, et al., No. 4:20-cr-00358 (E.D. Tex. Nov. 29, 2021).

[3] Press Release, U.S. Dep’t of Just., “Former Owner of Health Care Staffing Company Indicted for Wage Fixing” (Dec. 10, 2020), https://www.justice.gov/usao-edtx/pr/former-owner-health-care-staffing-company-indicted-wage-fixing; Press Release, U.S. Dep’t of Just., “Second Individual Charged with Fixing Wages for Health Care Workers and Obstructing FTC Investigation” (April 19, 2021), https://www.justice.gov/opa/pr/second-individual-charged-fixing-wages-health-care-workers-and-obstructing-ftc-investigation.

[4] Jindal, et al. at 18.

[5] Id. at 9.

[6] Id. at 10.

[7] Id. at 16.

[8] Press Release, U.S. Dep’t of Just., “Health Care Company Indicted for Labor Market Collusion” (Jan. 7, 2021), https://www.justice.gov/opa/pr/health-care-company-indicted-labor-market-collusion.

[9] Press Release, U.S. Dep’t of Just., “Health Care Staffing Company and Executive Indicted for Colluding to Suppress Wages of School Nurses” (Mar. 30, 2021), https://www.justice.gov/opa/pr/health-care-staffing-company-and-executive-indicted-colluding-suppress-wages-school-nurses.

[10] Press Release, U.S. Dep’t of Just., “DaVita Inc. and Former CEO Indicted in Ongoing Investigation of Labor Market Collusion in Health Care Industry” (July 15, 2021), https://www.justice.gov/opa/pr/davita-inc-and-former-ceo-indicted-ongoing-investigation-labor-market-collusion-health-care.

[11] https://www.justice.gov/atr/file/903511/download. See https://www.wsgr.com/en/insights/doj-and-ftc-put-hr-executives-on-notice-that-anticompetitive-hiring-and-compensation-practices-may-be-subject-to-criminal-prosecution.html.

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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