A Texas federal grand jury indicted a former owner of a therapist staffing company earlier this week on charges of participating in a price-fixing conspiracy with other staffing agencies to keep the physical therapists’ hourly rates below a certain amount. He was also charged with lying to the Federal Trade Commission, which enforces anti-trust violations and had investigated him in 2017.
The indictment revealed the following evidence of conspiracy:
- The owner asked one of his direct reports to text another owner of a competing staffing agency to discuss how much that owner was paying physical therapists (PTs) and physical therapists assistants (PTAs);
- He, through a direct report, instructed the owner of a competing agency that PTA rates should be lowered to $45, to which the competitor responded that she would “do it with them;”
- He contacted multiple staffing agency owners telling them: “I am reaching out to my counterparts about lowering PTA pay rates to $45 … What are your thoughts if we all collectively do it together?”;
- He then lowered his rates and notified other agency owners that he had done so;
- Following his announcement, other agency owners lowered their rates as well.
The indictment documents also state that Jindal made false statements and withheld information from the Federal Trade Commission, when it investigated the matter in 2017.
The indictment was a culmination of the joint DOJ and FBI investigation. If convicted, Jindal faces up to 15 years in prison and over $1 million in fines.
LESSONS: Wage-fixing, i.e., agreeing with competitors that everyone will pay the same wage or will not pay more than a pre-agreed amount, is illegal. Just as companies can’t get together and fix prices for goods, they are also prohibited from fixing prices for services.
In October 2016, the DJO and FTS put out Antitrust Guidance for HR Professionals, which in detail explains what activities by employers may violate wage-fixing prohibition and, most importantly, what activities to avoid. You can find the full text here, but the Guidance can be boiled down to the following simple rules for business owners and HR professionals:
- Companies that compete for employees are competitors regardless of whether they sell the same products or provide the same services
- It is unlawful for competitors to agree not to compete with each other
- Therefore, companies may not agree – expressly or implicitly, in writing or orally – not to poach each other’s employees or to cap salaries or benefits of their employees
- Specifically, business owners/HR professionals are “likely” breaking the anti-trust laws if they:
- agree with individuals at another company about employee salary or other terms of compensation, either at a specific level or within a range (wage-fixing agreement), or
- agree with individuals at another company to refuse to solicit or hire that other company’s employees (“no poaching” agreements)
- Business owners / HR professionals should avoid sharing sensitive information with competitors as it could serve as evidence of an implicit illegal agreement (especially where it causes companies to match each other’s arrangement)
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.