Warning To Employers: Court Permits Criminal Prosecution Of Wage-Fixing Agreement

• Published date: 09 December 2021
• Subject Matter: Anti-trust/Competition Law, Employment and HR, Antitrust, EU Competition , Employee Benefits & Compensation
• Law Firm: Buchanan Ingersoll & Rooney PC
• Author: Ms Carrie G. Amezcua and Mark A. Kasten

Employers have received the clearest signal yet that the courts will permit criminal prosecutions of employee wage-fixing agreements as per se violations of the Sherman Act. Last week, a district court in the Eastern District of Texas, in United States v. Jindal et al., permitted a criminal prosecution of the owner and a director of a staffing company to go forward, and denied motions of defendants to dismiss the charges.¹ In so doing, the court has, for the first time, permitted a criminal wage-fixing prosecution to proceed as a per se violation of the Sherman Act.

The Jindal court held that wage fixing is a form of price fixing, and therefore can also be considered per se illegal. Moreover, the court rejected the defendants' arguments that because this was the first time the government had prosecuted a wage-fixing conspiracy criminally, defendants were not on notice that wage-fixing conspiracies were per se unlawful as price-fixing agreements and subject to criminal prosecution.

The court's opinion has provided the government additional ammunition to prosecute horizontal wage-fixing conspiracies, and means that the government will undoubtedly continue to adopt an aggressive posture with respect to such agreements. Companies should take this opportunity to carefully review any agreements, particularly with competitors, that could be construed to be a restraint on the supply of labor. While the Jindal case is the first criminal prosecution of this type, it is unlikely to be the last.

Background

Defendant Neeraj Jindal owned a therapist staffing company and defendant John Rodgers was a clinical director for the same company. The company contracted with therapists to provide in-home physical therapy to patients. Therapist staffing companies, such as Jindal's company, receive patient referrals from home health agencies and staff their therapists to provide in-home care. Therapist staffing companies pay therapists a set price to provide in-home care, and bill home health agencies for that care. Companies can increase their margins by paying therapists at a lower rate, but the companies compete with each other to hire therapists.

The indictment alleges that defendants did the opposite. Rather than compete to hire therapists, defendants recruited other therapist staffing companies to artificially fix the pay rates of therapists.

The Department of Justice indicted Jindal and Rodgers, alleging that their agreement with competitors to fix the rates at which...