As DOJ, FTC look at antitrust in labor markets, some push for stiffer remedies

22 August 2018 1:34pm

9 August 2018. By Leah Nylen.

In March, antitrust prosecutors announced they had reached a settlement with two of the world’s largest rail-equipment manufacturers, Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation, known as Wabtec. For at least seven years, Knorr, Wabtec and a third company, Faiveley Transport SA, illegally agreed not to solicit or hire each other’s employees, particularly skilled employees such as project managers, engineers and executives.

The US Department of Justice came across the “no-poach” agreement during the merger review of Wabtech’s $1.8 billion purchase of Faiveley in 2016.

The March settlement with Knorr and Wabtech was the first time in more than eight years that DOJ antitrust prosecutors had challenged a no-poach agreement. As part of the settlement, both Knorr and Wabtech agreed they would no longer engage in no-poach agreements, would hire antitrust compliance officers and would report on their antitrust compliance for the next seven years.

The settlement did not, however, require Knorr or Wabtech to admit wrongdoing, something both companies pointed out minutes after the DOJ release.

“We firmly believe that our recruiting policies have been consistent with the antitrust laws and have in no way diminished competition for talent in the marketplace,” Wabtech said in a statement.

Knorr said it voluntarily entered into the settlement without admitting it had violated antitrust or any other laws in order to “put the matter behind it.”

The Justice Department’s complaint alleges the no-poach agreements disrupted the normal bargaining and price-setting mechanisms for employees, leading to depressed wages for workers. But the complaint didn’t quantify how much more employees might have earned absent the agreement or seek restitution on their behalf.

A DOJ official said the agency didn’t try to calculate the damages because that isn’t required to prove a per se, or automatic, offense under the Sherman Act. Affected employees also could file a private antitrust suit to recover damages from the conduct, the DOJ official said. In the months since, plaintiffs attorneys have done just that, filing class actions against the companies on behalf of rail-equipment industry workers.

Last week, the US’s other antitrust agency — the Federal Trade Commission — announced its own labor-related antitrust settlement. The FTC settled with Your Therapy Source, its owner Sheri Yarbray, and Neeraj Jindal, owner of a competing therapist staffing company, over allegations they conspired to reduce pay rates for physical therapists in the Dallas-Fort Worth area.

Yarbray and Jindal agreed on the rates at which they would pay therapists — including therapist assistants and physical, occupational and speech therapists — to treat patients of home health agencies. The pair also invited other therapist staffing companies to lower their rates so therapists wouldn’t try to jump between agencies.

The FTC settlement requires the company and the two owners to promise not to fix wages or collude with competitors on pay rates in the future. But the FTC didn’t require the company to notify impacted employees or calculate how much they might have lost in wages, an omission Democratic FTC Commissioner Rohit Chopra pointed out in a statement.

"The Federal Trade Commission is proposing to resolve this matter with a resolution that does not include any notice or restitution to those targeted by this unlawful conduct, nor any admission of facts or liability," Chopra said. "While in some situations, this may be appropriate, the Commission would benefit from hearing from the public on whether it should follow this approach in this and future matters, especially those involving our country’s growing 'gig economy.' "

In a public comment submitted to the FTC on Aug. 8, three left-leaning think tanks urged the agency to seek more aggressive remedies.

“By neither imposing monetary penalties nor empowering the injured workers to seek legal redress, the FTC effectively signals to employers that the legal consequences for colluding against workers are likely to be minor,” the Roosevelt Institute, Economic Policy Institute and Open Markets Institute said. “The FTC should seek remedies that make the injured workers whole and deter future wage fixing by employers — including through aggressive litigation, if the respondents refuse to settle on terms that would serve those legitimate policy aims.”

The FTC is accepting public comments on its settlement with the therapist staffing companies through the end of August and will then decide whether to move forward with or seek to modify the consent agreement.

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