Unionized Hospital Denied Antitrust Exemption in Nurses’ Suit

The University of Chicago Hospitals (UCH) was recently denied immunity from antitrust claims filed by nurses who alleged that UCH conspired with other hospitals to depress registered nurse wages in the Chicago market by sharing non-public compensation information. This ruling highlights the importance of having antitrust guidelines in place to limit circumstances in which hospitals share compensation information.

In Reed v. Advocate Health Care, No. 06 C 3337 (N.D. Ill. filed 2006), two RNs filed suit against several Chicago-area hospitals, alleging that the hospitals were conspiring to depress RNs’ wages in violation of § 1 of the Sherman Act. Plaintiffs allege that the hospitals regularly shared information about what each was paying, and what each was willing to pay, its RNs. The nurses seek to represent a class of RNs impacted by this alleged practice. (A decision on plaintiffs’ class certification motion is expected by the fall.)

Similar cases are pending in San Antonio, Memphis, Detroit, and Albany, and all have the backing of the Service Employees International Union (SEIU). Given SEIU’s aggressive efforts to organize in the health care industry, additional such suits should be expected. In addition, SEIU recently began circulating petitions asking the Department of Justice to open antitrust investigations of registered nurse compensation.

UCH has a collective bargaining agreement with the nurses’ union. UCH filed a motion for summary judgment, seeking immunity from plaintiffs’ claims under the “nonstatutory exemption” from federal antitrust laws. On March 28, 2007, the federal district court in Chicago rejected UCH’s argument. Reed v. Advocate Health Care, No. 06 C 3337, 2007 WL 967932 (N.D. Ill. Mar. 28, 2007). The court held that the nonstatutory exemption did not immunize UCH’s alleged sharing of non-public wage information with other hospitals that were not involved in collective bargaining with the nurses’ union.

Courts have recognized the nonstatutory exemption as an “accommodation between the congressional policy favoring collective bargaining under the [National Labor Relations Act] and the congressional policy favoring free competition in business markets.” Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 622 (1975). While the Clayton Act and Norris-LaGuardia Act exempt certain activities by employees and unions, the nonstatutory exemption reaches further to exempt “certain concerted activity among and between employers and unions.” Reed, 2007 WL 967932, at *2. For example, the Second Circuit recently held that the nonstatutory exemption immunizes from the antitrust laws an agreement between the various employers of the National Football League and the union representing players employed in that league to set a minimum age limit for entry into the league, despite the fact that that agreement excludes willing employees from that market. Clarett v. National Football League, 369 F.3d 124 (2d Cir. 2004). The Supreme Court has never defined the precise contours of this exemption. See Brown v. Pro Football, Inc., 518 U.S. 231, 250 (1996).

The Illinois court had no trouble disposing of UCH’s argument that it was entitled to the exemption. The court held that the exemption protects only those situations where “a group of employers negotiates collectively with a union representing all of the group’s employees.” Reed, 2007 WL 967932, at *3. In contrast, UCH sought exemption for its participation in “multi-employer conduct occurring outside the context of any collective bargaining scenario.” Id. The Reed court adopted the reasoning of a federal district court in New York that reached the same result in December 2006. See Unger v. Albany Med. Ctr., No. 06-CV-765-TJM-DRH (N.D.N.Y. Dec. 11, 2006). As the Unger court noted, simply because a hospital has entered a collective bargaining agreement, it cannot provide its wage information to other hospitals in an attempt to cap wages in the market. Reed, 2007 WL 967932, at *5.

This preliminary ruling is troubling, and obviously still subject to appeal. In the meantime, it serves as a reminder that health care employers need to consider many different laws and regulations which impact their ability to obtain comparative wage information from each other. Significantly, the National Labor Relations Act may enable unionized employers to request from their unions copies of contracts (which of course contain wage information) that union has with other health care facilities, as part of the union’s obligation to share information relevant and necessary to the collective bargaining process. However, until Reed is resolved through trial (and possibly appeal), unionized employers should obtain legal advice before sharing either proposed or current wage information with non-union employers.

In addition, private-sector health care employers, unionized and non-union, should remember that in addition to the “nonstatutory exception” discussed in Reed, there is a safe harbor under the antitrust laws that allows employers to share wage information with a third party (like an association or compensation consultant) conducting a wage survey. This safe harbor requires that the survey be managed by the third party, that the wage information be more than three months old, that at least five providers participate and no one provider’s data represent more than 25 percent of any one statistic (on a weighted basis), and that the wage information be reported back to the participants only in a way that does not allow those receiving the survey results to identify any particular participant’s wage rates.

Sharing of wage information among private, nonprofit or for profit, health care employers, should not be undertaken outside of a formal wage or salary survey, and competitors who are not members of a multi-employer bargaining unit should never agree on what to pay their respective employees.