What is the right compensation for a particular job?  That’s the question virtually every employer must face.  Pay too little, and the employer may not be able to fill a position or must settle for less than the best candidates.  Pay too much, and the employer loses money and may create other problems, including the morale of other employees, additional hurdles in managing substandard performers, and other aberrations in its compensation system. 

For that reason, many employers investigate what wages are being paid in the market place, often subscribing to third party services to provide competitive wage data.  The use of these services is driven in part by Department of Justice and Federal Trade Commission guidelines that create a safe harbor of sorts to permit employers to use data that is sufficiently non-specific to assist in making compensation decisions.  The purpose for these guidelines is to avoid potential antitrust violations where it can be claimed that employers have conspired to fix wages.  If that system fails, the employer can be faced with potentially staggering liability, as a recent case demonstrates.

In Cason-Merenda v. VHS of Michigan, Inc., Case No. 2:06-15601-GER-DAS (E.D. Mich., Sept. 13, 2013), the plaintiffs claimed that a group of hospitals in the Detroit area improperly shared wage information and colluded to fix the wages paid to tens of thousands of registered nurses. Perhaps significantly, all but one of the hospitals settled their claims on a class-wide basis.  The court denied, in part, the remaining defendant’s motion for summary judgment, and also denied its motion to reject the plaintiffs’ expert’s testimony on Daubert grounds.  Following those rulings, the plaintiffs sought certification of a class of approximately 20,000 registered nurses for wage decisions going as far back as 2002.  Given the magnitude of the claims, and the difficulty of reconstructing compensation decisions in the fast-paced world of health care from over a decade before, it isn’t hard to see why the other hospitals had chosen to settle.

The last defendant, however, did make cogent arguments in opposition to certification.  As the court itself noted, different hospitals used different surveys at different times and they used them differently, if at all.  A significant part of the nurses’ compensation consisted of things other than wages, and those components varied by employer and location (although the parties disagreed over the degree).  It pointed to disparities based on union versus non-union hospitals and the fact that wages did, in fact, vary among different institutions.  As the court acknowledged later in its opinion, the employer identified several factors that influenced a particular nurse’s wages, including “merit, education, expertise, negotiating power, willingness to take on more demanding duties or a less desirable shift, or myriad other factors.” The employer also pointed to several other cases refusing to certify such cases because of these and similar differences.  See, e.g., Reed v. Advocate Health Care, 268 F.R.D. 573 (N.D. Ill. 2009).

Although the court started its analysis with the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), much of the decision rests more on pre-Dukes antitrust law, in particular the case of In re Scrap Metal Antitrust Litigation, 527 F.3d 517, 535 (6th Cir. 2008), in which the Sixth Circuit, the court explained, expressed a preference for certification in antitrust cases.  The court similarly rejected the cases cited by the defendant by distinguishing them factually and, in places, questioning whether they would be followed in the Sixth Circuit. The court similarly rejected the defendant’s many challenges to the plaintiffs’ expert, finding them more suitable for cross-examination than for a basis to exclude the testimony entirely.

In reading the decision, one can’t help but wonder if the court wasn’t influenced by the fact that all of the other hospitals had settled on a class-wide basis and that it had already found a question of fact (and possibly believed the claims to be more than colorable) as to the merits.  Tellingly, nowhere does the opinion cite the Supreme Court’s decision in Comcast Corp. v. Behrend, 569 U.S. ___ (Mar. 27, 2013) (which we blogged here on March 28, 2013), or explain how, given its acknowledgement of so many individual factors bearing on the level of wages, damages could ever be determined on a class-wide basis.  After admonishing the defendant about holes that might exist in its trial strategy, the court certified the class.

Cason-Merenda is a rare example of an antitrust case being certified in the employment context.  While the defendant may seek Rule 26(f) review before the Sixth Circuit, and while there are troubling gaps in an otherwise well-written and thorough opinion, the matter has undoubtedly consumed extensive time, money, and attention for the employer. The case is now in its eighth year of litigation and the potential liability is undoubtedly a cause for concern.

The Bottom Line:  When antitrust cases go wrong in the employment arena, they go very wrong.