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Anti-Trust Enforcement of Labor Market Collusion & Pay Equity Are Becoming More Important

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In 2016, the Department of Justice (DOJ) shifted its policy to criminally prosecute employers and executives that enter into wage-fixing or no-poach agreements with other employers.  President Biden issued an Executive Order in 2021 that encouraged the DOJ and the Federal Trade Commission (FTC) to broaden enforcement against "wage collusion" and other unlawful labor market agreements.  Since then, the DOJ has brought criminal indictments in a number of market collusion cases.  However, although a number of these cases went to trial, all of them have resulted in acquittals until recently.  A recent victory of DOJ occurred on September 1, 2022, when a healthcare staffing company indicated it intended to plead guilty to anti-trust violations, based on accusations it conspired with a competitor to not raise wages of certain nurses or recruit or hire nurses from their competitors. 

The DOJ and FTC have issued Anti-Trust Red Flags for Employment Practices guidance.  While HR personnel may attend conferences to learn industry best practices and share information about compensation and hiring with others within their industry, they must take precautions when doing so.  For example, the DOJ in its recent cases seems to indicate that no-poach and wage-fixing agreements may be inferred from information exchanges between companies.  And an agreement need not be formal or written to violate the anti-trust laws.  Nevertheless, criminal prosecution of an anti-trust labor market violation requires an agreement between two or more individuals or companies not to compete in their recruitment or retention of employees.  

It is interesting that the anti-trust developments seem to be occurring around the same time that many states are moving towards wage transparency laws.  States like California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington have such laws, and a number of other states are moving towards the enactment of such laws.  In addition, various cities have wage transparency laws, including New York City and several cities and counties in New York state, Cincinnati, and Toledo.  These laws generally require employers to disclose the wage rate for each job they are filling.  The idea is to make pay more equitable, and to give employees more bargaining power as they are negotiating starting pay.  These laws can potentially have both negative and positive impacts.  For example, the patchwork nature of the laws makes it difficult for employers to know what laws they have to apply in the case of remote workers.  Further, in states or cities and counties subject to these transparency laws, employees may complain or file charges over why they are paid in the middle or bottom of the range, and such transparency may also increase the potential for pay equity lawsuits. On the other side of the coin, some argue that these laws have a positive impact on employees' feelings of fairness and job satisfaction and make it easier to attract talented workers.  

Also, the federal government is moving towards more emphasis on pay equity employment discrimination.  The most active agency is the Department of Labor's (DOL) Office of Federal Contract Compliance Programs (OFCCP), which enforces the discrimination statutes against federal contractors.  This agency requires contractors to run pay equity analyses in order to insure there is no discrimination on the basis of protected categories such as race or sex.  The broader the inequities appear, the more likely OFCCP is to find violations.  Isolated disparities are less likely to draw attention.  The Equal Employment Opportunity Commission (EEOC) may in the future require employers to report pay ranges as part of their annual EEO-1 filing requirements.

It is not unusual for a company to find itself in a position of having to hire someone for a critical position at a higher rate of pay than what is advertised to attract that person away from a competitor or for remaining with the employer.  In light of new wage transparency laws and pay equity issues, when doing so it would be helpful to document the reason why a higher wage was offered and to "red circle" that employee and show it represents a special situation.

This article is part of our January 2023 Newsletter.

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