When Companies Collude to Suppress Workers’ Wages

NELP recently submitted a comment to the Federal Trade Commission (FTC) urging the agency to impose tougher penalties on companies that collude to suppress wages. We filed the comment in response to a proposed settlement in a case where the companies allegedly colluded to keep wages for therapists low, a violation of antitrust law. The proposed settlement imposes no civil liability or restitution requirements on the parties.

The case involves issues that are important to millions of America’s workers. Two reasons for sluggish wage growth—the prevalence of “fissured” work and increasing labor market monopsony power (both explained below)—are at play in the case and will continue to depress wages until agencies, including the FTC, aggressively enforce the law.

The “fissured” workplace refers to the practice of outsourcing work to subcontractors such as staffing companies or to independent contractors. The staffing agencies in this case recruited and hired workers to be placed in homes to care for elderly and disabled individuals. Sometimes staffing companies label their workers as employees, and other times they label them as independent contractors. The more layers of businesses in the outsourcing chain, the less money there is to pay the workers, who too often work for poverty wages.

Increasing labor market monopsony power refers to reduced competition among employers, which shifts bargaining power to employers and allows them to dictate wages. Monopsony power not only allows employers to dictate wages, it changes the way they set wages—that is, these employers are more likely to outsource or “fissure” work in order to further reduce labor costs.[1] Limited competition among employers also increases the risk of implicit or explicit collusion, such as agreements not to hire each other’s workers, or (as is the case with the therapist staffing companies) agreements to coordinate on wage offers.

In 2016, the FTC and the U.S. Department of Justice published antitrust guidance warning that companies that collude on wages or other terms of employment face serious consequences, including civil and criminal liability. Considering the explicit warning in this guidance, it is inexplicable that the FTC has decided not to impose civil or criminal liability on the parties in this case, who are alleged to have engaged in clear violations of antitrust law and the guidance issued in 2016. The proposed settlement does not adequately compensate the therapists who were the victims of collusion. It also fails to deter other companies from colluding to suppress wages, which has significant consequences for the millions of people who work in staffing companies or are classified as independent contractors.

Given the clear violation of antitrust law and the FTC guidance and the far-reaching ramifications for America’s workforce, in cases like this one, the FTC should seek remedies that make the injured workers whole and that effectively deter future wage fixing by employers. These cases have real-world consequences for our health care system, labor market competition, and the millions of independent contractors and other “nonstandard” or “gig” workers who rely on precarious and often poorly paid work for their livelihoods.

[1] David Weil, Why We Should Worry About Monopsony, Institute for New Economic Thinking, Sept. 2, 2018, https://www.ineteconomics.org/perspectives/blog/why-we-should-worry-about-monopsony.