Nurse Wage Decision Highlights Risks of Sharing Wage Information

On July 22, 2010, the United States District Court for the Northern District of New York issued a decision that is important to employers.  In a case involving allegations of a conspiracy to suppress nurse wages, the Court denied the defendants' motions to exclude plaintiffs' expert testimony and their motion for summary judgment.  Fleischman v. Albany Medical Center, 06-CV-0765 (N.D.N.Y. July 22, 2010).  Thus, barring settlement, the case is positioned to proceed to trial.

Fleischman v. Albany Medical Center, 06-CV-0765 (N.D.N.Y.), is one of four nearly identical class-action antitrust lawsuits filed by nurses in Chicago, Albany, Memphis and San Antonio in June of 2006.  Each of the complaints contained two counts.  Count one alleged that hospitals conspired to suppress nurse wages, amounting to a per se violation of Section 1 of the Sherman Act.  Count two alleged that the hospitals conspired to exchange nurse wage information and that the exchange unreasonably suppressed nurse wages in violation of the Act.  Approximately six months later a nearly identical lawsuit was filed by nurses in Detroit.
In each of the cases plaintiffs have struggled to develop a reliable method of proving injury-in-fact and damages.  For example, on September 29, 2009, Judge Grady issued a decision in the Chicago case denying the plaintiffs' motion for class certification.  The Court found that the plaintiffs' method for proving classwide injury-in-fact through the testimony of their expert was unreliable and "essentially inadmissible."  Reed v. Advocate Health Care, 2009 U.S. Dist. LEXIS 89576 *65 (N.D. Ill., September 29, 2009).  The case was dismissed without appeal shortly thereafter when the plaintiffs accepted a nuisance value settlement.  (Seyfarth Shaw LLP was counsel for one of the defendants in the Reed litigation.)

In Fleischman, however, the plaintiffs used a different expert and pursued a different theory to show injury-in-fact and damages.  In Fleischman the plaintiffs' expert used adjusted agency nurse bill rates as a benchmark to determine what the competitive staff nurse wages would have been in the absence of the alleged conspiracy.  Although the defendants argued that this opinion was flawed and unreliable, the Court disagreed and held that the testimony would not be excluded.  The plaintiffs also offered the testimony of another expert to show that that the alleged wage information exchanges facilitated a conspiracy and reduced the defendants' incentives to compete.  Again, the Court denied the defendants' motion to exclude the testimony on the grounds that it was unreliable and unsupported.

The Court also denied the defendants' motion for summary judgment.  With respect to Count one, plaintiffs had no direct evidence of a conspiracy.  However, the Court ruled that the plaintiffs provided sufficient circumstantial evidence of a conspiracy to create an issue of fact for the jury.  In particular, the Court relied upon the numerous direct exchanges of wage information among the defendants through e-mails, telephone calls and in-person conversations at job fairs and professional association meetings.  It also noted that this information exchange included both current and future nurse compensation information.  In addition, the Court found that this exchange of information was contrary to the defendants' unilateral economic self-interest.  According to the Court, in the absence of a wage suppression agreement, the defendants would not want to exchange such information with their competitors because they knew that this information could be used to "poach" their nurses.  With respect to Count two, the Court also ruled that the plaintiffs provided sufficient evidence to create a triable issue concerning whether the defendants' exchange of wage information unreasonably restrained trade.  In doing so, the Court pointed to the plaintiffs' expert testimony showing: (1) that nurse wages in Albany were in fact suppressed, (2) that nurses were underutilized in Albany, and (3) that the exchange of wage information created disincentives for the defendants to compete. 

What is abundantly clear from the Court's decision in Fleischman is that it is critically important for employers to have in place an effective antitrust compliance program.  The program must ensure that its employees exchange wage and benefit information only in ways that satisfy the safety zone requirements of the joint enforcement policy statements by the Department of Justice and Federal Trade Commission with respect to the exchange of wage and price information.  To satisfy these requirements, employers should exchange wage and benefit information only through written surveys that meet the following conditions: (1) the survey is managed by a third-party (e.g., a purchaser, government agency, health care 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 percent 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.

Frequently, persons involved in recruitment or in the compensation process are unaware that direct exchanges of wage information or the participation in surveys that do not satisfy the above requirements can create antitrust risks, even if there is no intent to reach agreement on the wages that that will be offered.  Allegations that the defendants engaged in such information exchanges are at the heart of each of the five nurse wage suppression lawsuits.  These cases are very expensive to defend and the potential damage exposure is enormous.  Thus, employers should ensure that they have a compliance program in place that instructs their employees concerning what they can and cannot do in connection with the exchange of wage information and that they are reminded of the appropriate limitations on a periodic basis. 

For more information, please contact the Seyfarth attorney with whom you work, or any Labor and Employment attorney on our website.