Anti-Trust Law in the Work Place
On June 20, 2006, America’s fastest growing union, the SEIU, launched a creative new organizing weapon: anti-trust challenges to employer pay practices. The SEIU sponsored lawsuits charge targeted employers in Chicago, Memphis, San Antonio, and Albany, New York, with “price fixing” in setting their wage and benefit levels.1 These class action Complaints identify employer use of such common HR tools as wage and benefit surveys as circumstantial evidence of anti-trust violations.2
Labor and anti-trust law have long been intertwined. Use of wage and benefit surveys, and other employer tools for comparing market wage and benefit levels, are subject to anti-trust challenge. Yet, unions may also run afoul of anti-trust laws.
Persistent “corporate campaigns” and the recent “Employee Free Choice Act” illustrate that the labor movement is determined to play by new legal and organizing rules. To avoid responding to today’s union organizing strategies with yesterday’s techniques, employers need good defenses to union-sponsored, anti-trust lawsuits. Employers should also know the signs of “corporate campaign” tactics that may violate federal anti-trust rules. Employers need both an anti-trust “defense” and an anti-trust “offense” to respond to today’s non-traditional union organizing.
Defenses to Anti-Trust Challenges To Pay Practices. The SEIU’s anti-trust class actions target hospitals. Yet, unions could make similar allegations against almost any employer in almost every segment of the U.S. economy. At their core, the SEIU’s anti-trust claims find their basis in the following HR practices:
Participation in wage and benefit surveys;
Discussions about wages and benefits at HR and trade association meetings;
Telephone calls and other direct communication about wage and benefits between local HR professionals working at employers in the same industry in the same geographic area;
The existence of similar compensation levels for similar employees at different employers in the same geographic area.
How could such common HR practices be illegal? The answer is found in the “fine line” anti-trust law draws between pay practices designed to ensure competitive compensation versus information sharing evidencing unlawful wage and benefit “price fixing.”
Employers As “Competitors” For Employees. Anti-trust law treats employers as competitors competing to purchase the services of the available workforce at the best price. Wages and benefits are the price of employees’ services. Competition bids up the “price” (wages and benefits) employers are willing to pay for these services.
The Sherman Anti-Trust Act3 forbids any agreement or any other type of joint conduct that “unreasonably restrains” this competition. Express or implied agreements between employers that fix, peg, or stabilize wages or benefits are per se violations of the Sherman Act. No business justification excuses such an express or implied agreement to “fix the prices” of wages or benefits. Anti-trust rules, however, reach beyond actual agreements to fix wages and benefits. They outlaw any concerted action between employers that tends more to restrict than to promote wage and benefit competition.
All exchanges of wage and benefit information among employers are subject to this anti-trust scrutiny. Anti-trust regulators and the courts believe employer knowledge of what their competitors are willing to pay for labor, under some circumstances, restrains employer competitive bidding for labor. Employers need to know what sharing of wage and benefit information will expose them to anti-trust liability.
Wage and Benefit Surveys. The most common HR practice likely to come under anti-trust scrutiny is participation in wage and benefit surveys. Not all wage and benefit surveys violate anti-trust law. In fact, the U.S. Department of Justice acknowledges that wage and benefit surveys sometimes act to promote competition.4 To help employers separate pro-competitive wage and benefit surveys from those that may be anti-competitive, the U.S. Department of Justice and the Federal Trade Commission (FTC) have announced an “Anti-Trust Safety Zone” for wage and benefit surveys.
The “Anti-Trust Safety Zone” is found in the Justice Department’s and FTC’s joint “Statements of Antitrust Enforcement Policy and Health Care.”5 Nevertheless, the anti-trust principles embedded in the “Safety Zone” apply to all segments of the economy. Accordingly, the “Safety Zone” is widely considered applicable beyond the healthcare industry.
The “Anti-Trust Safety Zone” establishes three criteria that wage and benefit surveys must meet in order to qualify for the “safety zone.” These are:
“1. The survey is managed by a third party (e.g. a purchaser, government agency, healthcare consultant, academic institution, or trade association);
2. The information provided by survey participants is based on data more than 3 months old; and
3. There are at least five providers reporting data upon which each disseminated statistic is based, no individual provider’s data represents more than 25% on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider.”6
The “Anti-Trust Safety Zone” does not guarantee that a wage and benefit survey complies with anti-trust law. It does not insulate a participation from anti-trust litigation. Yet, the U.S. Department of Justice represents that, “absence extraordinary circumstances,” neither the Justice Department nor the FTC will challenge an employer’s participation in a survey meeting the “Safety Zone’s” criteria.7 Further, since the “Safety Zone” reflects judicial interpretation of federal anti-trust law,8 a private plaintiff is unlikely to win an anti-trust lawsuit based solely upon an employer’s use of a wage and benefit survey qualifying for the “Safety Zone.”
Other Exchanges of Wage and Benefit Information. Surveys are, of course, not the only means by which employers can obtain wage and benefit information. Direct exchanges of wage and benefit information between employers presents the greatest anti-trust danger. Even direct exchanges, however, are not automatically illegal.9 Yet, direct exchanges of wage and benefit information create circumstantial evidence of wage “price fixing.” This is particularly true if the information exchanged is current and specific.10 Among the allegations made in the SEIU’s 2006 anti-trust litigation is that HR professionals exchanged wage and benefit information at local trade association and HR professional meetings. This is why CUE adopts a strict policy against sharing at any of its meetings and conferences any information that may run afoul of anti-trust laws.11
What To Do. Make sure your wage and benefit market research will pass anti-trust scrutiny. Obtain credible assurance that any wage and benefit surveys used fall within the “Anti-Trust Safety Zone.” If in doubt, obtain advanced regulatory review of the survey. The Justice Department offers an “expedited business review procedure,”12 and the FTC13 offers an advisory opinion procedure.14 Make sure that the trade association and human resources meetings you attend diligently prevent any discussion of wages or benefits that might create circumstantial evidence of anti-trust violations. Avoid any direct discussion of wages and benefits with HR colleagues who work for other employers hiring the same types of employees. Such diligence provides the best defense against a union anti-trust attack upon your company.
An Anti-Trust “Offense.” Anti-trust laws also offer employers a strategic “offense” against union “corporate campaign” tactics.15 Traditional union concerted activity, among unions and union members, is exempt from federal16 and state17 anti-trust laws. “Corporate campaigns,” however, seldom use traditional union tactics. Employers need to understand the rationale and limits of the union anti-trust exemption in order to know when anti-trust laws may offer an offensive strategy against a union “corporate campaign.”
The Union Anti-Trust Exemption. Congress long ago determined that workers, as sellers of labor (in contrast to employers as buyers of labor), should be free to join together to end competition over the “price” (wages) for their services.18 Support for this “collective bargaining process” is the rationale for labor’s anti-trust exemption.19 Accordingly, when unions join with others to eliminate competition over anything other than wages and working conditions, unions often step outside their anti-trust exemption.20 They become subject to anti-trust laws.
What To Watch For. Both anti-trust laws and Labor’s anti-trust exemption are confusing even to the courts. We cannot set out all the legal parameters here. Certain “sign posts,” however, point to the potential for union anti-trust liability. When you see these “sign posts,” call them to your labor lawyer’s attention. You may have a powerful anti-trust “offensive strategy” against a union corporate campaign.
Union Action With Non-Unions. Only unions have a role to play in controlling competition over wages and other working conditions. For this reason, union alliances with entities other than unions – particularly businesses – are an important “sign post” to union anti-trust liability.21 For example, in corporate campaigns unions may conspire with distributors to keep to a union-free manufacturing firm from selling its products in a particular market. A union may “persuade” a group of doctors not to refer patients to a union-free hospital. A union may unite with local retailers to keep a national chain from getting a lease in a shopping center. A union may pressure a bank not to finance a union-free enterprise. In each example a union is uniting with a non-union entity to take action that may restrain trade. Both the union and its co-conspirator may incur anti-trust liability.
Importantly, a Union may violate anti-trust laws even if the non-union entity’s “cooperation” with the union is involuntary. In Connell Construction Co. v. Local 100,22 the U.S. Supreme Court approved a federal anti-trust lawsuit against a union that picketed a contractor until the contractor agreed to do business with only union subcontractors. The Supreme Court found that the union stepped outside its anti-trust exemption because it sheltered the employers of its members from outside competition. The Supreme Court exposed the union to anti-trust liability even though the union’s purpose was “to support its organizing campaign.”23
Union Pressure On Others To Pressure You. Connell Construction Co. v. Local 100 points to another important “sign post” of union anti-trust liability. Many courts have found anti-trust exposure where unions use “secondary” pressure to persuade others to cease doing business with the true target of the union’s tactics.24 The National Labor Relations Act also outlaws most such “secondary” pressure.25 The U.S. Supreme Court has ruled, however, that the NLRA is not the exclusive remedy where a union violates anti-trust laws with actions that could also violate the National Labor Relations Act.26 Employers need to be alert for “secondary” union pressure upon customers, suppliers, distributors, sources of financing and desirable real estate. Such “secondary” pressure may create union anti-trust violations.
Violence As An Anti-trust Violation. Recent years have seen employer attempts to address union violence through RICO litigation. When union members join together in an effort to prevent the sale of a target company’s goods or services through violence, however, they are also subject to anti-trust liability.27
Permitted Union Actions With Non-Unions. Not all union actions with non-union groups violate anti-trust laws. Unions are always free to unite with other groups in order to influence governmental bodies.28 The NLRA authorizes unions to obtain agreements that permit only union laborers on a specific construction job site.29 Agreements among employers and unions for purposes of facilitating collective bargaining are always exempt from anti-trust laws.30
The Big Picture. In the “big picture” of union organizing, anti-trust litigation can have an impact beyond the pressure it places on employer or union. Mere media coverage of a lawsuit charging an employer with a conspiracy to suppress wages can create employee suspicion of their employer that is ideal for traditional union organizing. On the other hand, newspaper headlines announcing a lawsuit against a union and it co-conspirators for blocking competition tells the story of unions causing higher prices and less selection, for the benefit of the union but at the expense of everyone else. The adversarial relationship unions bring to the workplace costs employers, employees, and customers alike. Like CUE membership, having an anti-trust “defense” and “offense” can help employers avoid this needless “adversarial relationship cost.” This benefits everyone.
1. Reed, et al. v. Advocate Healthcare, et al., No. 06-CV-03337 (N.D. Ill. June 20, 2006); Clark, et al. v. Baptist Mem’l Healthcare Corp., et al., No. 06-CV-02377-JMP-DKV (W.D. Tenn. June 20, 2006); Maderazo v. Vanguard Health Sys., et al., No. 06-CV-00535-OLG (W.D. Tex. June 20, 2006); Unger v. Albany Med. Ctr., et al., No. 06-00765 (N.D. N.Y. June 20, 2006).
3. 15 USC § 1.
4. Statement of Antitrust Enforcement Policy in Health Care, Statement 6 – Provider Participation In Exchanges of Price and Cost Information (August 1996) p. 49, available at http://www.usdoj.gov/atr/public/guidelines/0000.htm.
8. The “anti-trust safety zone” addresses federal anti-trust law. Many states also have anti-trust laws applicable only within its jurisdiction. Employers should check with their labor law counsel to determine how state anti-trust laws may impact their labor and employment practices in the states where they operate.
9. United States v. Citizens & Southern Nat’l Bank, 422 U.S. 86, 113 (1975); Todd v. Exxon Corp., 275 F.3d 191, 214 (2nd Cir. 2001)(exchanging compensation information may “enhance competition by making competitors more sensitive to each other’s price changes, enhancing rivalry among them.”).
10. See, e.g., Todd v. Exxon Corp., 275 F.3d 191, 212-13 (2nd Cir. 2001).
11. For a copy of CUE’s Antitrust Statement contact the CUE office. The policy is also included with all CLE Conference Materials.
12. 58 Fed. Reg. 6132 (1993).
13. 16 C.F.R. §§ 1.1-1.4 (1993).
14. The U.S. Justice Dept. and the FTC represent that they will provide employers with an answer to whether a particular survey complies with anti-trust law within 90 days after the employer submits all necessary information to the Justice Dept. or the FTC.
15. For an insightful treatment of available legal challenges to union corporate campaigns, to which this article owes much, see, Fletcher, The Corporate Campaign – Labor’s Ultimate Weapon or Suicide Bomb? 65 North Carolina Law Review 85 (1986-1987).
16. Sections 6 and 20 of the Clayton Act, 15 U.S.C. § 17 and 29 U.S.C. § 52; Norris-LaGuardia Act, 29 U.S.C. §§ 104, 105 and 113; See also, United States v. Hutcheson, 312 U.S. 219 (1941).
17. Federal preemption of the entire labor law field prevents application of state anti-trust laws to labor unions, under any circumstances. Connell Constr. Co. v. Plumbers Local 100, 421 U.S. 616, 620 & 635 (1974).
18. Congress pass the Clayton Act in 1914 largely in response to court decisions holding that the Sherman Anti-Trust Act outlawed many union activities as unreasonable “restraints of trade.” 15 USC § 17.
19. Sections 6 and 20 of the Clayton Act, 15 U.S.C. § 17 and 29 U.S.C. § 52; Norris-LaGuardia Act, 29 U.S.C. §§ 104, 105 and 113; See also, United States v. Hutcheson, 312 U.S. 219 (1941) (statutory exemption); Meat Cutters v. Jewel Tea Co., 381 U.S. 676, 689-690 (1965). Otherwise, some provisions in collective bargaining agreement would violate anti-trust laws. See, Jewel Tea, supra at 689-690 and 709-720, 732-733; Mineworkers v. Pennington, 381 U.S. 657, 664-665 (1965); Brown v. Pro Football, Inc., 518 U.S. 231, 240-242 (1996)(non-statutory exemption).
20. See, National Ass’n of William and Children’s Apparel Salesmen, Inc. v. FTC, 479 F2d. 139, 144 (5th Cir.) cert denied, 414 U.S. 1004 (1973); Great Atlantic & Pacific Tea Co. v. Amalgamated Meat Cutters & Butcher Workmen Local 88, 410 Fed 3d 650, 653 (8th Cir.) (1969).
21. See, e.g., Allen Bradley Co. v. Local Union No. 3, 325 U.S. 797, 809-810 (1945); Great Atlantic & Pacific Tea Co. v. Amalgamated Meat Cutters & Butchers Workmen Local 88. 410 F2d 655, 653 (8th Cir.) (1969).
22. 421 U.S. 616, 623 – 625 & 635 (1975).
23. Id. at 623.
24. Connell Construction Co. supra.; Lawlor v. Loewe, 235 U.S. 522, 533 – 534 (1914); Allen Bradley, 325 U.S. at 808 – 10; FritoLay, Inc., v. Retail Clerks Local 7, 629 F2d. 653, 663 (10th Cir.1980); Larry v. Muko, Inc., v. Southwest PA Bldg. & Constr. Trades Council, 609 F2d. 1368, 1372-73 (3rd Cir.1979).
25. Section 8(b)(4)(B) of the National Labor Relations Act forbids picketing as a form of secondary pressure and Section 8(e) of the Act forbids agreements not to do business with another. The Act grants narrow exceptions for construction unions working on a common site, and for unions operating in the garment industry.
26. Connell Construction Co. supra, at 633 – 635.
27. See 15 U.S.C. § 17 (1982); Altemose Constr. Co. v. Atlantic Cape May & Parts, 493 F. Supp. 1181, 1190 – 91 (D. N.J. 1980); United States v. Drivers, Chauffeurs & Helpers Local 639, 32 F. Supp. 594, 598 – 600 (D. D.C. 1940); Dean v. International Longshoremen’s Assn., 17 F. Supp. 748, 750 (W.D. La. 1936).
28. Eastern R. Conference v. Noerr Motor Freight Inc., 365 U.S. 127, 137 – 38 (1961).
29. See, note 26, supra.
30. See, e.g., Brown v. Pro Football, Inc., 518 U.S. 231, 250 (1996).