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  • May 19, 2022

    Two Strikes for DOJ: Health Care Executives Not Guilty of Antitrust Conspiracies

    The U.S. Department of Justice’s recent criminal prosecutions of health care executives for no-poach and wage-fixing conspiracies have been met with not-guilty verdicts. Despite these losses, Wendy Arends says that the Department continues to prosecute this conduct, and that antitrust enforcers will investigate human resources practices that may restrain competition.

    Wendy K. Arends

    In mid-April, juries in Texas and Colorado found health care company executives not guilty of criminal antitrust charges brought by the U.S. Department of Justice Antitrust Division (DOJ).

    Despite the two losses, DOJ continues to move forward with similar charges brought against other health care companies. Employers in the health care industry (and beyond) should be aware that human resources (HR) practices that restrain competition in the labor market may be investigated or prosecuted by antitrust enforcers.

    DOJ Prosecutes First Criminal Wage-Fixing and No-Poach Conspiracies

    In December 2020, a criminal indictment against Neeraj Jindal was returned by a federal grand jury alleging a per se illegal conspiracy for wage-fixing involving a Texas-based physical therapist staffing company.

    The novel criminal indictment alleged that the defendant (Jindal) agreed with a competing staffing agency to reduce the rates paid by each company for physical therapists during a five-month period in 2017. Jindal was also alleged to have separately reached out to four other competing agencies about collectively decreasing rates, and was accused of obstructing the Federal Trade Commission (FTC) investigation.

    More criminal indictments alleging other health care labor market conspiracies have followed.

    In January 2021, DOJ brought criminal charges against Colorado-based DaVita Inc. (DaVita) and its former CEO, alleging that DaVita and its competitors entered into and engaged in a conspiracy not to poach and hire one another’s senior-level employees. The alleged agreement included phone and email conversations between HR professionals, instructions not to solicit certain senior-level employees, and monitoring employees to ensure their adherence to the agreement. The senior-level employees were also required to notify their respective employers that they were seeking new employment in order for their application to be considered by the other companies participating in the arrangement.

    In March 2021, another grand jury returned an indictment against a Nevada-based health care staffing company and a former manager of the company, alleging they had entered into and engaged in an agreement with a competitor to allocate employee nurses and fix their wages in violation of the Sherman Act.

    Wendy Arends headshot Wendy Arends, George Washington 2005, is a partner with Husch Blackwell, LLP in Madison, where she concentrates her practice on antitrust and consumer protection matters, including within health care and allied sectors.

    Juries Find Jindal and DaVita Not Guilty of Antitrust Violations – What’s Next?

    On April 14, 2022, a jury found that Jindal was not guilty of conspiring with competitors to lower workers’ wages in violation of Section 1 of the Sherman Act, but it did find him guilty of obstruction of justice of a related FTC investigation.

    Following on the Jindal verdict’s heels, a Colorado jury acquitted the kidney dialysis provider DaVita and its former CEO of violating federal antitrust law when they entered into alleged no-poach agreements with competitors.

    Since the issuance by DOJ and the FTC of the 2016 Antitrust Guidance for Human Resource Professionals, they have made it clear that they view naked wage-fixing and no-poach agreements between competitors as criminal violations of the Sherman Act. While DOJ’s recent losses suggest that juries do not agree, federal antitrust enforcers will continue to pursue these cases. DOJ currently has five pending criminal cases for alleged labor market conspiracies.

    Outside of the criminal context, DOJ and the FTC appear to be taking a more aggressive posture with respect to whether, and in what context, certain no-poach or non-solicit agreements are ancillary to a legitimate business arrangement between the parties (such as a joint venture).

    They are also pursuing labor market considerations as part of merger reviews, including the FTC’s review of the proposed merger of Lifespan Corporation and Care New England System.

    What this Means for Health Care Employers

    DOJ’s commitment to criminally prosecute no-poach and wage-fixing agreements and the Biden administration’s push to review issues affecting labor markets stand in contrast to the recent jury acquittals in Jindal and DaVita. The law is unsettled in this area, but antitrust enforcers remain undeterred.

    Given the push by antitrust enforcers to investigate and prosecute alleged restraints of competition in various labor markets, it is important for health care employers to ensure their HR practices conform with antitrust laws.

    This can include reviewing current employment practices and agreements, providing antitrust training for those who participate in hiring and compensation activities, and committing to a strong and dynamic compliance program that will account for the evolving law in this area.

    This article was originally published on the State Bar of Wisconsin’s Health Law Blog. Visit the State Bar sections or the Health Law Section webpages to learn more about the benefits of section membership.

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    Health Law Section Blog is published by the State Bar of Wisconsin; blog posts are written by section members. To contribute to this blog, contact Kristen Nelson and review Author Submission Guidelines. Learn more about the Health Law Section or become a member.

    Disclaimer: Views presented in blog posts are those of the blog post authors, not necessarily those of the Section or the State Bar of Wisconsin. Due to the rapidly changing nature of law and our reliance on information provided by outside sources, the State Bar of Wisconsin makes no warranty or guarantee concerning the accuracy or completeness of this content.

    © 2024 State Bar of Wisconsin, P.O. Box 7158, Madison, WI 53707-7158.

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