A state appeals panel has determined staffing companies can’t use a labor services exclusion to escape antitrust litigation in which the Illinois Attorney General’s Office levied accusations of wage suppression and anti-poaching techniques.
Attorney General Kwame Raoul sued Elite Staffing, Metro Staff and Midway Staffing, along with their mutual client, Colony Display, in Cook County Circuit court. Colony, which makes custom fixtures, exhibits and displays for a variety of customer classes, uses temporary workers for the majority of its labor.
After Judge Raymond Mitchell denied two motions for dismissal, he certified two questions for appeal to the First District Appellate Court.
Illinois First District Appellate Justice Thomas Hoffman
| Illinoiscourts.gov
Justice Thomas Hoffman wrote the opinion on those questions, filed June 3; Justices Mathias Delort and Joy Cunningham concurred.
According to the panel, Judge Mitchell’s questions concerned the Illinois Antitrust Act’s definition of “service,” and whether a rule that explicitly applies to conspiracies among competitors extends to allegations of so-called "horizontal agreements with a vertical noncompetitor facilitating."
Court records indicate Colony used the staffing agencies for hiring as well as a degree of ongoing employee management, including providing supervisors at Colony’s sites, paying temp workers’ wages and benefits, and retaining sole discretion over hiring, firing and assigning workers. The state alleged Colony facilitated the agencies’ agreement to keep wages low and to not hire workers away from each other.
“The services provided by staffing agencies are generally not excluded from the Act’s coverage,” Hoffman wrote, saying the agency defendants’ attempt to distinguish “labor” of temp workers from the “service” a staffing agency provides constitute an attempt to broaden exceptions written into the law without adequate support for their position.
“The Act merely provides that individual labor is not a service, so that otherwise anticompetitive action restraining individual labor is permissible,” Hoffman wrote. “It does not provide that the exemption extends to services like those provided by staffing agencies that are ‘related to’ labor, whatever that may mean.”
Concerning the second question, the panel said the answer “depends not on the presence of a vertically situated party, but rather on the nature of the agreement and the conduct at issue.”
While the plain language of the Antitrust Act doesn’t provide as clear an answer as it did for the first question, the panel continued, the challenged section is patterned after the federal Sherman Antitrust Act, and federal case law under that statute is instructive.
A horizontal agreement is one among competitors, while a vertical agreement involves firms at different distribution levels, the panel said.
“Federal case law makes clear that a vertical party’s coordination of a horizontal restraint among competitors does not necessarily transform the otherwise horizontal restraint into a vertical one,” Hamilton wrote. The agencies’ attempts to argue the state improperly directed its allegations fell short, he continued, because courts have reviewed such allegations under different standards depending on circumstances.
“The classification of a conspiracy as horizontal or vertical is not determined by the presence of a vertically situated party, but rather by the existence or absence of concerted horizontal action,” Hoffman concluded, “and whether the per se rule applies to such a horizontal conspiracy depends on whether the restraint at issue is naked or ancillary, with per se consideration given to the former and the rule of reason applied to the latter.”
With the questions answered, the panel sent the action to Judge Mitchell for further proceedings.
Attorney Amy B. Manning, of McGuire Woods, of Chicago, is representing Elite Staffing.
John R. Hayes, of SmithAmundsen, of Chicago, is representing Midway Staffing.
David J. Fish, of the Fish Law Firm, of Naperville, is representing Metro Staff.
Colony Display is represented by attorneys Scott Mendelhoff, Gabriel Aizenberg, David S. Repking and Brian D. Straw, from Greenburg Taurig, of Chicago.