Affidavit: Healthcare and the Law - “Hardcore Cartel Conduct”: Antitrust Crackdown in Healthcare Labor Markets

Contributors: Sean S. Zabaneh and Kevin M. Moran, JD’19
To learn more about Sean and Kevin, click here.

 

Healthcare businesses should pay close attention to the antitrust implications of so-called “wage fixing” and “no poach” agreements, which generally refer to agreements between competitors regarding the hiring and/or compensation of their employees. 

The recent high-profile prosecution of DaVita, Inc. — one of the world’s largest dialysis providers — and its former CEO for allegedly engaging in no-poach agreements should serve as a clear warning sign. Although the government ultimately failed to obtain a conviction at trial, the antitrust agencies nevertheless appear resolute to continue to pursue antitrust violations, specifically in healthcare labor markets, likely with sharpened focus on achieving more successful outcomes in the future.

Because the potential criminal, civil, and other consequences are substantial, healthcare businesses should not only avoid obviously illegal agreements with competitors regarding employees, but they also need to properly and carefully navigate potentially legal arrangements and information sharing that seek to advance a procompetitive purpose.

Wage Fixing and No-Poach Agreements Overview

The Department of Justice (“DOJ”) defines a “no-poach agreement” as one between companies not to compete with each other for employees, such as by not hiring or soliciting them. A “wage-fixing agreement” involves an agreement between companies regarding salary or other terms of compensation.1 In 2016, DOJ and the Federal Trade Commission (“FTC”) jointly issued guidance that such agreements are per se illegal under the antitrust laws. The agencies further stated an intent to pursue criminal prosecutions for these arrangements, which they characterize as comparable to “hardcore cartel conduct.”2

According to DOJ, these agreements are illegal because they potentially restrain competitive pay and opportunities for professionals. However, the agencies also recognize that legitimate collaborative joint ventures (e.g., those with a procompetitive purpose to increase output) are not necessarily considered illegal, and therefore employee agreements that are ancillary to such ventures could themselves be procompetitive. For instance, most joint-purchasing arrangements among healthcare providers, such as those designed to increase the efficiency of procurement and reduce transaction costs, do not raise antitrust concerns.3 Additionally, a non-solicitation provision in an agreement between two nurse-staffing companies to collaborate on nurse spillover assignments was recently found to not violate the antitrust laws because it advanced the procompetitive goal of fulfilling hospital demand for travel nurses.4 FTC has, nonetheless, warned that even potentially legitimate restrictions on soliciting employees “must be narrowly tailored to protect the value to the business of the personnel at issue [and] they should not act as a de facto no-poach agreement.”5

Agency Approach in the COVID Era

DOJ historically limited its enforcement of no-poach/wage-fixing agreements to civil actions. However, in April 2020, DOJ and FTC issued a joint statement announcing greater scrutiny of employers, staffing companies, and recruiters who engage in potentially anti-competitive conduct in labor markets in light of the COVID-19 pandemic, including through criminal prosecution.6  President Biden has also made clear by executive order in 2021 that “the President encourages the FTC to ban or limit non-compete agreements” altogether and has named the healthcare industry as a specific area of focus.7

DOJ has since brought its first criminal wage-fixing indictment against Neeraj Jindal, the former owner of a therapist staffing company. Jindal was charged with participating in a conspiracy with a competing staffing company to lower the rates paid to physical therapist assistants through non-public rate information sharing.8 Although the court allowed the case against Jindal to proceed to trial because the government had articulated allegations that could conceivably constitute per se illegal price fixing, DOJ struggled to prove the allegations at trial, and in April 2022, Jindal was acquitted on the antitrust charges.9

DOJ has also brought additional criminal no-poach cases against other healthcare entities and executives.10 The most notable of these cases involved the criminal prosecution of DaVita and its former CEO for allegedly conspiring with competitors to enter no-poach agreements that would prevent each company from hiring the other’s senior-level employees. However, once again, the government failed to obtain a conviction, as DaVita and the former CEO were acquitted of all charges in April 2022.11

In early 2022, DOJ charged managers of home healthcare agencies in Maine for conspiring to suppress and fix wages, restrict job mobility, and not hire each other’s employees.12 That case has not yet been resolved. 

In some instances, the government’s scrutiny of labor agreements has led to private plaintiffs asserting civil claims, including class actions, that compound the potential exposure to the business.13

Key Takeaways for Healthcare Businesses

So what conduct is allowed and what should a business avoid? The legality of any agreement or information sharing regarding employees is highly dependent on the particulars of the situation, and businesses should always consult legal counsel before proceeding.  It is clear, however, that the agencies will likely view any naked agreement between competitors to refuse to hire or solicit employees or about terms of employee compensation as illegal.  Nevertheless, some employee information sharing or collaborative joint ventures between companies may be legal if they serve an overarching procompetitive purpose. The agencies have shared guidance on how to narrowly tailor employee information sharing in order to minimize risk, including the following three elements:14

  • A neutral third party manages the information exchange;
  • The exchange involves information that is relatively old; and
  • The information is aggregated (to protect employees’ identities) such that competitors would not be able to link particular data to an individual source.

This narrow tailoring contemplated by the agency guidance, in conjunction with careful consultation with legal counsel, has never been more important. As recent cases demonstrate, the federal government has not been deterred by unsuccessful outcomes and thus appears likely to pursue even cases that may be difficult to prove at trial. The agencies will also likely make adjustments in future prosecutions based on lessons learned in the Jindal and DaVita cases that might improve their future likelihood of success at trial. 

Healthcare businesses therefore need to pay attention because the potential consequences are severe. In addition to criminal and civil penalties, healthcare organizations that receive federal funds may face additional consequences, including, among other things, automatic termination from enrollment with Medicare, state Medicaid agencies, and MCO contracts,15 Medicare and Medicaid disclosure requirements based on affiliations with convicted entities or persons with five-year lookbacks,16 and exclusion by the Office of Inspector General.17

In sum, businesses should avoid external arrangements regarding their employees unless there is a procompetitive reason to do so, and, if that is the case, consult legal counsel early to ensure the arrangement is narrowly tailored to achieve that procompetitive purpose.


Contact Sean at: [email protected]
Contact Kevin at: [email protected]


Disclaimer: This article has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. 

References

  1. DOJ, Spring 2018 Division Update, available at https://www.justice.gov/atr/division-operations/division-update-spring-2018/antitrust-division-continues-investigate-and-prosecute-no-poach-and-wage-fixing-agreements#:~:text=A%20wage%2Dfixing%20agreement%20involves,level%20or%20within%20a%20range.

  2. DOJ & FTC, 2016 Joint Antitrust Guidance for Human Resource Professionals (the “Antitrust Guidance”), available at https://www.justice.gov/atr/file/903511/download.

  3. See FTC & DOJ, Statement of Antitrust Enforcement Policy in Health Care at 53 (1996); FTC, Competitive job markets offer more than just fringe benefits, Oct. 20, 2016, available at https://www.ftc.gov/news-events/blogs/competition-matters/2016/10/competitive-job-markets-offer-more-just-fringe.

  4. Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc., 9 F.4th 1102 (9th Cir. Aug. 19, 2021).

  5. Brian Telpner, FTC, Bureau of Competition, Just because it’s ancillary doesn’t make it legal (Sept. 30, 2019), available at https://www.ftc.gov/news-events/blogs/competition-matters/2019/09/just-because-its-ancillary-doesnt-make-it-legal.

  6. DOJ & FTC, Joint Antitrust Statement Regarding Covid-19 and Competition in Labor Markets (April 2020), available at https://www.justice.gov/opa/press-release/file/1268506/download/.

  7. White House: Briefing Room, Fact Sheet on Executive Order 14036 (Jul. 9, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/; Executive Order 14036, Executive Order on Promoting Competition in the American Economy (Jul. 9, 2021), available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/

  8. United States v. Neeraj Jindal, Case No. 4:20-CR-358 (E.D. Tex. Dec. 09, 2020); DOJ, Former Owner of Health Care Staffing Company Indicted for Wage Fixing, Dec. 10, 2020, available at https://www.justice.gov/opa/pr/former-owner-health-care-staffing-company-indicted-wage-fixing.

  9. DOJ, Former Health Care Staffing Executive Convicted of Obstructing FTC Investigation into Wage-Fixing Allegations (April 14, 2022), available at https://www.justice.gov/opa/pr/former-health-care-staffing-executive-convicted-obstructing-ftc-investigation-wage-fixing. Note that Jindal was ultimately convicted of obstructing FTC’s investigation as a separate charge from the antirust allegations.

  10. United States v. Surgical Care Affiliates LLC et al., 3:21-cr-00011 (N.D. Tex); United States v. Hee, 2:21-cr-00098 (D. Nev.); and United States v. DaVita Inc. et al., 1:21-CR-00229 (D. Col.).

  11. United States v. DaVita Inc. et al., 1:21-CR-00229 (D. Col.).

  12. DOJ, Four Individuals Indicted on Wage Fixing and Labor Market Allocation Charges (Jan. 28, 2022), available at https://www.justice.gov/opa/pr/four-individuals-indicted-wage-fixing-and-labor-market-allocation-charges

  13. See, e.g., In re Geisinger Health Healthcare Workers Antitrust Litigation, No. 4:21-CV-00196, Mem. Op. (M.D. Pa. Nov. 16, 2021).

  14. The Antitrust Guidance, at 4-5.

  15. 42 C.F.R. §§ 455.416(c), 438.600(a)(10), 438.602(b).

  16. 42 C.F.R. §§ 424.502, 1001.601.

  17. 42 C.F.R. § 1001.101.