DOJ Faces Two Strikeouts in First Health Care Wage-Fixing and “No Poach” Prosecutions
On April 14, 2022, a Texas jury returned five not-guilty verdicts on six charges considered in the first federal criminal wage-fixing prosecution. A day later, on April 15, 2022, a Colorado federal jury entirely acquitted DaVita, Inc. and its former chief executive on all counts of conspiring with other companies to suppress competition in the market for employees. These results mark early losses in the Department of Justice’s new efforts to put health care executives behind bars in the hopes of deterring illegal wage-fixing and “no poach” agreements, but will this slow down the Department of Justice’s criminal prosecution of these types of agreements?
The Department of Justice has spent more than five years preparing for the current wave of trials in wage-fixing prosecutions. In 2016, the Department of Justice announced its intent to begin treating hiring practices, such as “no poach” conspiracies not to hire employees working for competitors, as criminal violations. The Department did not immediately begin to seek criminal indictments, the first wave of indictments was not issued until 2020 and these cases are headed to trial just this year. Now in the span of one week, the Department is faced with two big losses in the first two cases to return verdicts.
The Department has promised for years tougher antitrust enforcement in health care markets to combat what it characterizes as “constraints” that hold down pay and prospects across the labor market. The new focus on the hiring practices of health care companies led to the first-ever criminal indictments issued to individuals for engaging in illegal wage-fixing and “no poach” agreements. These cases would have previously been handled by the civil enforcement section. The approach is consistent with the Department’s recent willingness to take on a higher proportion of “tough” cases, with one official at the Antitrust Division characterizing the current mentality as, “if we win every case, we are not being aggressive enough.”
The first of the wage-fixing cases to go to trial was United States v. Jindal, where the government alleged a therapist staffing company engaged in price-fixing in violation of the Sherman Act by conspiring with its competitors to keep wages low. The jury rejected the argument, finding the defendants not guilty in the alleged scheme, and only issuing a single guilty verdict related to Defendant Jindal, the owner of the staffing company, for obstructing the investigation after lying to FTC officials. Similarly, the first “no poach” case, United States v. DaVita, alleged three conspiracies between health care companies to not solicit the employees of each other. Both DaVita and its former CEO were acquitted on all counts related to the alleged agreements, concluding with the judge offering his “Congratulations to the defendants, condolences to the government.”
Despite these two blows to the Antitrust Division, pre-trial rulings in both Jindal and DaVita still leave the door open for additional prosecutions on these theories. In Texas, the District Court recognized the government’s novel characterization of wage-fixing agreements as a form of price-fixing that is “illegal per se” and rejected the efforts of the defendants to prevent the case from reaching trial. The court acknowledged that the defendants were “unlucky” to be the first prosecuted for this type of conduct but ultimately allowed the case to proceed. In Colorado, the court held that the non-solicitation agreement alleged in the DaVita indictment could also be a per se violation, with the court placing the violation “under the umbrella” of a horizontal market allocation agreement. However, the court cabined the ruling stating that it is not true that “every non-solicitation agreement or even every no-hire agreement” would be treated as per se illegal. The Department is already relying on the Jindal order in United States v. Hee, another wage-fixing case brought in the same wave of indictments, which is set for trial this summer in Nevada.
Moving forward, health care companies can expect enforcement to continue and even to expand. In just four years, the Department moved from announcing its intention to bring wage-fixing and “no poach” cases to its first wave of indictments. And Department officials have recently indicated that the Antitrust Division is considering or preparing to bring criminal charges in monopolization cases, another area formerly limited to civil enforcement efforts.
Given this landscape, health care companies should implement or revise antitrust compliance programs to address the new risks posed by the expanding criminal enforcement, and those programs and training should be provided to all human resource professionals. Further, any indication of a government investigation into a company’s hiring practices should be handled carefully, in light of the conviction of Jindal for obstruction and the potential for jail time, costly follow-on civil litigation, or a prohibition on doing business with government programs like Medicare.