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Roughnecks Wrangle for More Money

Workers trying to force a reluctant employer to give them a raise, generally have to threaten to strike or to leave. Now, though, a group of Texas offshore oil workers has come up with a novel strategy for wringing more money out of their bosses: antitrust litigation.

According to a complaint filed in federal court in Galveston, the rig hands contend their employers have been meeting secretly the last 10 years or longer to set ceilings on wages and police the agreement. Such activity constitutes price fixing, the complaint asserts, a felony.

"It would be a very rare case, but I see no reason why the theory wouldn't work," said Gary V. McGowan, a former antitrust lawyer in Houston and now a workplace mediator. "Conspiracy to set prices can involve services as well as goods."

Price-fixing cases more typically involve sellers of goods like vitamins, chemicals or art objects, and can land offending managers and executives in prison. But the Texas case is a civil action, and the oil workers are seeking not criminal convictions but more money.

Damages suffered in lost wages over 10 years "will easily exceed $5 billion," the complaint states. As lead plaintiff, Thomas Bryant, a former electrician, says he represents a class of 100,000 fellow workers, and seeks triple damages.

Mr. Bryant has chosen to match wits with a veritable pantheon of major drilling contractors, independent oil companies and well-heeled corporate defense lawyers. One defendant, Ensco International, was founded by the Texas financier, Richard Rainwater, the friend and one-time investment partner of President-elect George W. Bush.

In their responses, the 20 named defendant companies denied that any secret meetings occurred. Their lawyers say there is no huge "class" of aggrieved workers, only Mr. Bryant and his creative lawyers.

Legal experts say that any price-fixing charge is difficult to prove. Mr. Bryant's lawsuit mostly involves suspicions, not hard evidence of collusion, and asks the court for broad latitude to discover evidence.

Even so, those suspicions are grounded in an economic puzzle: why wages for oil-rig workers barely budged during labor shortages in 1997 and in 2000 after oil prices rose and drilling companies rushed to put idled rigs into production.

In a free market, such shortages are supposed to push wages high enough to lure departed workers. Instead, rig hands stayed away, and desperate employers wound up trying to recruit parolees at prison gates or flying in foreign oil workers. Texas radio stations even broadcast a tune whose lyrics pleaded, "roughnecks come home."

Many managers blamed the abundance of retailing jobs at places like Wal-Mart for their absence, but Mr. Bryant smelled a conspiracy. "Wages paid offshore workers didn't rise even enough to keep up with inflation," said his lawyer, Anthony Buzbee, formerly of Susman Godfrey L.L.P., a Houston firm known for its antitrust work. Mr. Buzbee left two years ago to start a plaintiffs' practice.

It is a long way from these suspicions to a smoking gun, however. The most clear-cut antitrust cases usually come to light in geographically limited markets, said Jim Mutchnik, a former Justice Department prosecutor, and in sectors where margins are thin and competition fierce.

Under such conditions, plant managers may decide they cannot undercut the competition's price -- that would wipe out their profit -- so they approach their crosstown rivals and propose to divide the market, Mr. Mutchnik said. Dairies have been found guilty of fixing milk prices in school districts, and gas station owners in Iowa were once caught rigging the price of gas along a stretch of the Interstate highway system.

Mr. Mutchnik, now an antitrust and white-collar criminal defense lawyer with the Chicago firm of Kirkland & Ellis, said the Justice Department had also investigated wage fixing, in a case in which several hospitals appeared to have colluded to fix the pay of health professionals.

The hospital case was a strong one, Mr. Mutchnik said, because all the hospitals were in a single city and the aggrieved workers had skills they could not easily sell elsewhere. He predicted the oil workers would have a harder time proving a secret drillers' cabal because they were so numerous and so spread out.

But that is not to say compensation experts do not think Mr. Bryant is not onto something. Peter Capelli, a professor of management at the Wharton School of the University of Pennsylvania, said he thought gentlemen's agreements to suppress wages were "remarkably commonplace."

Large companies routinely hire consultants to survey one another's pay scales, he said, and while that does not constitute price fixing, he has seen employers cross the line. Corporate recruiters have long swapped entry-level salary information before descending on college campuses, he said. And in his own field, he recalled that the American Economic Association for years held an annual "chairman's breakfast," at which "the best universities all agreed on what they were going to pay" faculty members.

"Finally, someone pointed out to them that this was violating the law and they'd better put an end to it," said Mr. Capelli, author of "The New Deal at Work" (1999, Harvard Business School Press), a study of the way market forces are shaping compensation practices in the new economy.

"It wouldn't surprise me that this went on in virtually every small town in the United States," he said. "Particularly in mill towns, where there's more than one employer looking for people to do the same type of work. The problem is getting anybody to talk about it."

 

Mary Williams Walsh
New York Times
January 10, 2001