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Antitrust Division Brings First Criminal Wage-Fixing Charge

December 14, 2020, Covington Alert

On December 10th, the Antitrust Division of the U.S. Department of Justice announced its first criminal indictment targeting an alleged conspiracy to reduce employee wages. The DOJ charged the former owner of a therapist staffing company with conspiring to reduce pay rates for healthcare worker contractors, but did not charge the company itself. Specifically, the indictment alleges that, for a six-month period in 2017, the defendant and his co-conspirators exchanged non-public information on rates paid to healthcare workers; discussed and agreed to decrease rates paid to healthcare workers; implemented rate decreases in accordance with their agreement; and paid healthcare workers at collusive and noncompetitive rates. The indictment alleges that the defendant’s behavior constitutes a per se violation of the antitrust laws and seeks penalties including fines and potential imprisonment. The indictment also includes an obstruction of justice charge, stemming from allegedly false or misleading information the defendant provided the Federal Trade Commission during the agency’s investigation of the same subject matter.

For years, DOJ has been emphasizing the possibility of criminal charges for wage-fixing and other efforts to restrict competition in the labor markets. In 2016, the DOJ and FTC issued their joint Antitrust Guidance for Human Resource Professionals, warning human resource and other professionals involved in hiring that the DOJ would “criminally investigate allegations that employers have agreed among themselves on employee compensation or not to solicit or hire each others’ employees.” The Guidance further cautioned that, if a DOJ investigation “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.” In the four years since it was issued, the DOJ has opened a number of criminal investigations, but it had yet to bring a charge, and its criminal wage-fixing and no-poaching theories have remained untested in court.

The indictment underscores that enforcement agencies (and the DOJ in particular) are particularly focused on policing these types of anticompetitive agreements that restrict competition in labor markets.In addition to making clear that it considers wage-fixing and “no poach” agreements between employers to be per se violations of the Sherman Act, the DOJ has also been increasingly active in supporting private challenges to such restrictions. The indictment makes clear that such restrictions can now expose a company and individual participants in the conspiracy to criminal, as well as civil, liability.

These developments serve as a reminder for the need to closely adhere to the antitrust laws, including in areas that do not directly affect consumer prices (such as employee salaries or benefits). Compliance training, including for individuals involved in human resources and hiring, is an important tool for ensuring adherence and avoiding potential civil or criminal exposure down the road.

How Covington Can Help

Our antitrust practice group includes attorneys who served at the DOJ and FTC and who have decades of experience in advising on criminal antitrust matters. Our team has specific experience dealing with DOJ and counseling clients on these employee wage and “no poach” antitrust issues. We can provide detailed and practical insight into how these developments might apply, as well as compliance training for employees and briefings for senior management.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Antitrust/Competition practice.

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