DOJ Rejects Petition to Allow Labs to Compensate Employed Sales Reps Using Variable Compensation Under EKRA

The Department of Justice (DOJ or the Department) has formally denied a petition from the American Clinical Laboratory Association (ACLA) requesting rulemaking under the Eliminating Kickbacks in Recovery Act of 2018 (EKRA). ACLA asked DOJ to issue rules under EKRA allowing for compensation of employed sales representatives in any manner, including through variable compensation, consistent with the Anti-Kickback Statute (AKS) safe harbor for employees. DOJ denied this request in a Federal Register noticepublished on September 25, 2026 (the Notice) and also advanced a restrictive interpretation of EKRA as prohibiting commission-based arrangements tied to referrals even where such arrangements might be allowed under the AKS for employed sales representatives.

While DOJ’s reasoning for rejecting the requested rulemaking is seemingly based on precedent that involves payment to independent contractors rather than employed sales representatives, the Notice represents one of few express articulations of DOJ’s interpretation of EKRA on this point. The Department also commented that EKRA took effect nearly eight years ago, “providing ample time for laboratories to adapt their business models and compliance programs to align with its requirements.”

ACLA’s Petition

EKRA’s passage in 2018 created confusion because its employee exception, which prohibits compensation based on the volume or value of business the employee helps to generate, is inconsistent with the AKS’s employee safe harbor, which does not impose this restriction.

In its September 30, 2024, petition, ACLA proposed that DOJ, through regulation, confirm that employers can pay any form of remuneration, including variable compensation, to employed sales representatives, so long as:

• the employee does not knowingly and willfully provide materially false or misleading information to health care providers to influence referrals for items or services paid by any health care benefit program; or
• the employee does not provide such information to patients to influence their requests or use of services paid by any health care benefit program.

These limiting factors diverge from the AKS employee safe harbor, which merely requires that the compensation be paid to a bona fide employee. ACLA presumably took this approach in an effort to mirror the court’s decision in United States v. Schena. In Schena, the Ninth Circuit considered whether percentage-based compensation paid to laboratory marketers was paid “to induce referrals,” thereby triggering EKRA. In that case, the court found (and the government conceded) that percentage-based compensation paid to a marketer is not per se unlawful under EKRA. Instead, to trigger EKRA, such payments must reflect a wrongful effort to unduly influence decisions of test-ordering providers. Ultimately, the court explained that “at a minimum, when percentage-based payments are made to marketing agents who are directed to mislead those making the referrals about the nature of and need for the covered medical services, those payments would violate EKRA. This is not a necessary set of circumstances for establishing undue influence, but it is sufficient.”

In support of the proposed rulemaking, ACLA argued that EKRA is not a categorical bar on variable compensation, that courts have issued inconsistent decisions on the statute’s reach, and that appropriately structured commission plans support provider education, test utilization management, in-network steering, and cost control, all of which ultimately benefit patients and payors. In ACLA’s view, the proposed rulemaking would reduce legal uncertainty, address due process and separation-of-powers concerns raised by vague criminal standards, and preserve compensation practices widely used to attract and retain experienced sales personnel in the laboratory industry.

DOJ’s Response

DOJ declined to initiate the requested EKRA rulemaking and rejected ACLA’s proposed framework. DOJ characterized ACLA’s proposed rule as an attempt to limit EKRA to situations involving fraudulent conduct, i.e., where sales representatives provide “materially false or misleading information” to induce referrals. In DOJ’s view, conditioning liability on proof of false or misleading statements would “circumscribe the scope of the statute” to fraud scenarios already covered by other laws. Such a standard would “set a high bar for enforcement” and unduly constrain prosecutions in cases where laboratories design compensation schemes to reward referral volume, even absent overt misrepresentations. Underscoring that EKRA targets financial incentives themselves, not just fraudulent speech or conduct, DOJ also highlighted that Congress passed EKRA to fill a gap in enforcement against abusive patient-brokering and kickback practices that impacted private payors but were not captured by the AKS.

DOJ expressly rejected the notion that misconduct under EKRA turns solely on deceptive communications; even lawful, non-fraudulent marketing tied to referral volume can be problematic when it compromises patient choice, fosters unfair competition, leads to overutilization and unnecessary testing, and increases health care costs. DOJ pointed to the court’s decision in United States v. Schena to argue that EKRA reaches beyond traditional fraud.

The Department framed variable, volume-based compensation for sales representatives as inherently suspect under both EKRA and the AKS. DOJ emphasized that EKRA’s core concern is with “kickback structures” that directly reward or induce referrals. Further, allowing variable compensation tied to referral volume risks reintroducing the very arrangements EKRA was designed to eliminate, particularly in the context of laboratory services. Notably, however, DOJ relied on AKS cases and OIG advisory guidance applicable to percentage-based commissions and other volume-linked payments made to independent contractors — not employed sales representatives — as supporting its conclusions.

Business and Compliance Implications for Laboratories

DOJ apparently views commission structures for employed and independent contractor sales representatives that vary by referral volume, number of tests, or revenue as potentially implicating EKRA. If that is the case, employee compensation arrangements that comply with the AKS employee safe harbor may not be permissible under EKRA. Absent a successful appeal of DOJ’s decision not to exercise rulemaking authority or an act of Congress, DOJ’s expressed interpretation of EKRA may represent the framework within which laboratories must understand their EKRA-related obligations going forward.

The denial of ACLA’s petition thus provides several practical takeaways for laboratories, providers, and investors operating in the diagnostics space. First, laboratories should consider reviewing their compensation plans and compliance policies, procedures, and training to ensure EKRA compliance. Second, laboratories and other stakeholders should continue to monitor case law interpreting EKRA and related DOJ and OIG enforcement trends for further guidance. Third, all interested parties should take note of DOJ’s advisement that EKRA has been in effect for nearly eight years, providing the laboratory industry with significant time to adjust compensation models and compliance programs. The Department believes that DOJ has exercised its EKRA enforcement authority judiciously to date, but it remains to be seen what the future will bring.

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