WASHINGTON (AP) — The Justice Department is expected to file a lawsuit against some of the largest poultry producers in the U.S. along with a proposed settlement seeking to end what it claims have been longstanding deceptive and abusive practices for workers.
The suit is being filed in federal court in Maryland naming Cargill, Sanderson Farms and Wayne Farms, along with a data consulting company known as Weber, Meng, Sahl and Company, according to three people familiar with the matter. The people could not publicly discuss the specific details of the suit before the filing was made public and spoke to The Associated Press on condition of anonymity.
In its lawsuit, the Justice Department alleges the companies have been engaged in a multiyear conspiracy to exchange information about the wages and benefits of workers at poultry processing plants in order to drive down employee competition in the marketplace, the people said.
The government contends the data consulting firm helped to share the information about the workers’ compensation with the companies and their executives, the people said. By carrying out the scheme, officials allege the companies were able to compete less intensely for workers and reduce the amount of money and benefits they had to offer their employees, suppressing competition for poultry processing workers across the board, the people said.
The defendants and unnamed co-conspirators in the lawsuit account for hiring about 90 percent of all chicken processing jobs in the nation, one of the people said.
The suit is the latest example of the Justice Department’s antitrust enforcement targeting companies the government believes engage in anticompetitive behavior to stifle workers or harm consumers. It also comes as the department continues a broader investigation into labor abuses in the poultry industry.
The suit is being filed with a proposed consent decree — a settlement that would require the companies to pay $84.4 million in restitution for workers who were harmed by the unlawful information sharing network, the people said.
The settlement would also put in place a federal monitor selected by the Justice Department who would ensure compliance for the next decade. The consent decree also would permit Justice Department lawyers and investigators to inspect the poultry processors’ facilities and interview their employees to ensure they are complying with the terms, the people said.
The suit comes as Cargill and Continental Grain — of which Wayne Farms is a subsidiary — formed a joint venture to acquire Sanderson Farms , paying $203 per share in cash for a company that last year processed more than 4.8 billion pounds of meat.
The companies plan to combine Sanderson Farms with Wayne Farms to form a new, privately held poultry business. Operations will include poultry processing plants and prepared foods plants across Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, and Texas.
Wayne Farms has more than 9,000 employees. It makes products under brand names including Wayne Farms fresh and prepared chicken, Platinum Harvest premium fresh chicken, Chef’s Craft gourmet chicken, Naked Truth premium chicken and Ladybirdy premium chicken.
Laurel, Mississippi-based Sanderson Farms has 17,000 employees and 12 plants. It processes 13.6 million chickens per week.
The proposed consent decree would also resolve allegations that Sanderson Farms and Wayne Farms treated chicken farmers unfairly by using a system that reduced their pay for low performance.
The farmers sign contracts to raise the chickens and the processing companies provide the birds and the feed. Their pay is then determined by how well the farmers perform compared to other chicken growers. The Justice Department alleges that the companies’ use of that compensation method, known as the “tournament system,” resulted in their failure to provide information for farmers to evaluate and manage their financial risk.
Generally, chicken producers enter long-term contracts with meat companies that farmers say lock them into deals that fix their compensation at unprofitably low levels .
As part of that settlement, Sanderson Farms and Wayne Farms would be prohibited from reducing the base payments to chicken growers as a way to penalize them for under-performance, the people said. The consent decree would, though, allow the companies to offer incentives and bonuses to growers, according to the people.
The proposed consent decree is being filed as part of the suit on Monday. Under federal law, the proposal would also be published in the Federal Register and there would be a 60-day period for people to send comments to the Justice Department before a court could accept and finalize the agreement.