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Legal Updates

The Fix Is In: Wage-Fixing Lawsuits Against Hospitals Illustrate The Risk Of Sharing Wage Data

Hospitals beware:  sharing copies of your collective bargaining agreements (or otherwise discussing wage data) with other health care institutions may give rise to wage-fixing lawsuits under the antitrust laws.  The latest reminder of this is a federal lawsuit filed in Memphis, Tennessee, Clarke v. Baptist Memorial Healthcare Corp, in which the court ruled recently that allegations of information-sharing among area hospitals could support a charge that the hospitals unlawfully conspired to fix the wages of registered nurses (“RNs”).  Clarke is one of four separate wage-fixing cases filed in 2006 in Albany, Chicago, Memphis and San Antonio by RNs with the apparent support of the Service Employees International Union (“SEIU”).

Each of the four cases is a class-action lawsuit alleging that area hospitals have conspired to exchange wage information and depress RN wages in violation of federal antitrust law.  The plaintiffs in each case seek to represent all RNs employed by the defendant hospitals since June 20, 2002.  They contend that, as a result of the alleged unlawful conspiracies, RNs have been underpaid annually by approximately $14,000 in Memphis, $6,000 in Albany, $5,000 in Chicago and $1,300 in San Antonio.  The plaintiffs seek to recover treble damages with respect to each class member, plus costs and attorneys’ fees, as provided by federal antitrust law.  Thus, the stakes for the defendant hospitals are high.

The Clarke decision, which denied defendant Baptist Memorial Healthcare Corporation’s motion to dismiss, reflects the court’s determination that the RNs have stated a plausible claim and, accordingly, may proceed with their lawsuit.  This decision is significant in the broader context because it reflects a preliminary acceptance of the legal theory on which all four cases are based (and, in turn, on which future such cases may be based).

The RNs’ theory is that in each metropolitan area, the defendant hospitals have exchanged information about RN wages through meetings at trade shows, telephone conversations among the hospitals’ human resources staffs and written or oral surveys about wages, the results of which were circulated among the hospitals.  The RNs contend that (i) these communications evidence an unlawful conspiracy to exchange RN wage information, and (ii) the hospitals used this information in an unlawful conspiracy to depress RN wages.

Although federal antitrust law applies in both union and non-union settings, the implications of these lawsuits may be greatest for hospitals with RN bargaining units, as SEIU appears to be behind them.  SEIU separated from the American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”) in 2005 and affiliated with six other unions to form a labor organization called “Change to Win.”  Earlier this year, SEIU announced that it will form a single national health care union—SEIU Heathcare—by consolidating its division representing hospital workers with its division representing home health and nursing home workers.  Such lawsuits may be part of a strategy to bolster the visibility, and in turn the membership, of this union.

In any event, these cases suggest that hospitals with RN bargaining units could expose themselves to significant antitrust liability—not to mention the costs and associated burdens of defending class-action litigation—by sharing wage information with each other in connection with collective bargaining.  Indeed, it appears that even casual discussions of RN wages, e.g., telephone conversations between hospital human resources representatives, could constitute circumstantial evidence of an unlawful wage-fixing conspiracy.

Fortunately, there is guidance available for hospitals that wish to participate in and benefit from the lawful exchange of RN wage information.  The federal agencies that enforce the antitrust laws, the U.S. Department of Justice and the Federal Trade Commission, have established an “antitrust safety zone” for hospitals in this situation.  Hospitals that fall within the antitrust safety zone are generally immune from federal antitrust prosecution for exchanging and using wage data.  (This will not necessarily prevent private lawsuits like those discussed here, but may operate to discourage them.)

A hospital will be deemed to be within the antitrust safety zone if it participates in written wage surveys under the following three conditions:

  • the survey is managed by a third party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
  • the information provided by survey participants is based on data more than three (3) months old; and
  • there are at least five (5) providers reporting data upon which each disseminated statistic is based, no individual provider’s data represents more than twenty-five percent (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 compensation paid by any particular provider.

U.S. Dep’t of Justice et al., Statements of Antitrust Enforcement Policy, Statement 6 – Provider Participation in Exchanges of Price and Cost Information (1996).

Hospitals are encouraged to familiarize themselves with these guidelines when developing RN wage proposals in collective bargaining (or when establishing RN wages in a non-union setting).  This should help hospitals benefit from the exchange of wage data while avoiding lawsuits like those filed in Albany, Chicago, Memphis and San Antonio.

We would be happy to answer any questions you may have about these guidelines specifically, or labor and employment-related health care issues in general.