On October 20, 2016, the Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission (“the agencies”) jointly issued Antitrust Guidance for Human Resources Professionals. The eleven page guidance document, along with a two page “red flags” chart, highlight increasing antitrust scrutiny in the market for human capital.
Companies compete to attract and retain human capital, and this competition is particularly intense in areas that require particular skills, training and education. Companies and their employees create antitrust risk or violations when they agree or coordinate on policies that impact the recruitment, hiring or retention of employees or executives, including agreements or protocols on wages, benefits or other terms of compensation; agreements between two or more companies not to solicit or poach employees from one another; the sharing or exchange of information with details about compensation; any other coordinated interaction that may restrict the opportunities or compensation available to employees. In many instances, the line between permissible and problematic conduct may be a difficult call, such as business collaborations that rely on joint hiring or combining workforces of two companies, or indirect employees of a company who are technically employed by a third party (who may also provide indirect employees to other companies). These arrangements may be efficient practices, but could also be perceived as a means to suppress wages.
The agencies’ guidance warns that certain blatant antitrust violations related to human capital, such as naked no-poaching or wage-fixing agreements, may result in criminal liability against the company and/or responsible individuals within the company. Criminal violations are punishable by hefty fines and possibly jail time for individuals. A wider range of related conduct may result in civil liability from either the agencies (seeking injunctive relief and possibly disgorgement) or from private plaintiffs (seeking treble damages). Individual states may also bring civil suits.
The guidance addresses some of the agencies prior litigation in this area:
• In U.S. and State of Arizona v. Arizona Hospital and Healthcare Association and AzHHA Service Corp., No. CV07-1030-PHX (D. Az May 22, 2007), the Antitrust Division and the State of Arizona alleged that Arizona Hospital and Healthcare Association and AzHHA Service Corporation (collectively “AzHHA”), though the provision of temporary nursing services to hospitals, agreed with the hospitals to set uniform bill rates and other contract terms for the purchase of temporary nursing services from nurse staffing agencies, in violation of Section One of the Sherman Act and its Arizona counterpart. That case resulted in a consent decree (settlement agreement), which included injunctive relief.
• In U.S. v. eBay Inc., No. 12-CV-05869-EJC-PSG (N.D. Cal. Sept. 2, 2014), the Antitrust Division alleged that eBay and Intuit, Inc. agreed not recruit each other’s employees and eBay further agreed not to hire Intuit employees. The Division alleged that this agreement reduced competition for highly-skilled technical and other employees, in violation of Section One of the Sherman Act. This case also resulted in a consent decree. See also U.S. v. Lucasfilm Ltd., No. 1:10-cv-02220-RBW (D.D.C. June 3, 2011) (Lucasfilm and Pixar); U.S. v. Adobe Systems, Inc.; Apple Inc.; Google Inc.; Intel Corp.; Intuit Inc.; and Pixar, No. 1:10-cv-01629-RBW (D.D.C. Mar. 18, 2011).
• In In re Deces Corp., 115 F.T.C. 701 (1992), the FTC alleged that several nursing homes boycotted a nurse registry that attempted to raise prices for short-term nursing services. The FTC alleged that nursing home representatives discussed the proposed price increase and then separately expressed that they would no longer use that registry, while threatening to boycott other registries if they attempted to raise prices. The FTC charged that the nursing homes conspired to eliminate competition and depress pricing for temporary nursing services. The case resulted in a consent decree. See also Council of Fashion Designers of America, FTC Docket No. C-3621 (consent order, Oct. 17, 1995).
Each type of allegation brought by the agencies – wage fixing, concerted boycotts and no-poaching agreements, have also been the subject of civil antitrust suits. Conduct of this nature is particularly conducive to class action litigation.
Even short of a lawsuit alleging an antitrust violation, questionable conduct or allegations concerning compensation or hiring practices may result in an antitrust investigation by the agencies. The issuance of guidance is a particular indication that the agencies are looking more closely at human capital markets and more likely to engage if suspicions arise.
The agencies guidance is specifically targeted for HR professionals, a group that has not traditionally been a target for antitrust compliance. The guidance notes that “HR professionals often are in the best position to ensure that their companies’ hiring practices comply with the antitrust law. In particular, HR professionals can implement safeguards to prevent inappropriate discussions or agreements with other firms seeking to hire the same employees.”