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Like Price Fixing, Wage Fixing Illegal

Price-fixing cases are fairly common. And there's an interesting one going on now in New York over whether executives from the two giant auction companies, Christie's and Sotheby's, agreed to fix commissions and eliminate discounts. But it's fairly rare for companies to end up in court over another type of antitrust complaint -- getting together to fix wages and benefits. And that is just as illegal.

Earlier this month, more than a dozen offshore oil drilling firms in Houston agreed to settle a wage-fixing case for $75 million. The firms allegedly fixed the wages and benefits of 60,000 laborers over three decades.

A check with several employment lawyers found that no one could recall another case of wage-fixing. The economic evil that can result is generally the same, said Bill Burke, a lawyer who works on antitrust cases in Houston. People pay too much in the market when price fixing occurs, and in a wage-fixing case, they're paid less than they should be in a free market.

But wage-fixing cases are hard to detect. People don't generally reveal how much they earn, so it's not very easy for rank-and-file employees to uncover a pattern. And like in most price-fixing cases, there aren't typically written documents. It's often done with a conversation and a handshake.

In the oil-drilling case, the employees went to Houston lawyer Anthony Buzbee to complain about their wages. Buzbee, who isn't talking much about the case, was apparently struck by how many of the offshore workers earned the same wages despite changes in market demand and the multitude of employers.

Practice may be common E. Dale Wortham, president of the Harris County AFL-CIO and former organizer for the International Brotherhood of Electrical Workers Local 716, suspects wage fixing is relatively common.

"If you look at the advertised wages of a nonunion electrician, they roughly earn "$17 and more," Wortham said. But there's little more than a 25-cent to 50-cent difference among them. Wortham suspects that the message gets passed along during construction-industry association meetings when executives get together and hear the results of surveys of average pay.

That essentially sets the pay, Wortham said, and they adhere to the average. When one pays a lot more, the other companies get angry because they don't want to lose their talented employees, he said, or pay more to keep them.

But is that really illegal? Burke said the key is whether an agreement or some kind of mechanism has been put in place to set wages and benefits in some way. Generally it's OK to just look around and copy what your competitors are doing, he said. It all changes when you meet at the coffee shop and map out how much you'll each pay. It also runs afoul of the law when employers agree not to recruit each other's employees, Burke said.

But some employers apparently don't realize that. At least one large nationwide bank has an agreement with a nationwide management consulting firm that they won't recruit each other's employees, according to one of the bankers. But agreeing not to recruit deprives those employees from seeking the jobs.

Many jobs mean less collusion Another reason wage-fixing doesn't come up too often is that it's difficult to set wages where there are a lot of places to work, Burke said. If a computer programmer doesn't want to earn $100 a day, he can go to a variety of other industries. But if you work in a specialized profession and there are only a few employers who would hire you, there would be more opportunities to fix wages. It may also work if a few large employers in a job-starved community got together.

Joe Ahmad, an employment lawyer in Houston, said he has heard complaints from workers that businesses in a certain neighboring county have conspired to keep wages low. When a new business came to town and began paying higher-than-normal wages, a representative from the major employer in the county paid a visit and "set them straight," he said. But documentation was impossible to find, and no one with firsthand knowledge would come forward. Ahmad said he believes the story, but he'd need something better than a hunch to take to a jury.

 

L.M. Sixel
The Houston Chronicle
November 15, 2001