On October 20 2016 the US Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued guidance for human resources (HR) professionals on steps to avoid antitrust violations. This covers 'no-poaching' agreements, agreements to fix wages or other terms of employment and the exchange of HR information. The guidance includes a question and answer section, which provides examples of the application of the antitrust laws in various practical situations, as well as a one-page reference card that sets out some antitrust red flags for employment practices.
The guidance follows well-publicised interest in these issues by both US antitrust agencies. Most notably, following long investigations, in 2010 the DOJ entered into consent decrees with several high-tech companies – including Adobe, Apple, eBay, Google, Intel, Intuit, LucasFilm and Pixar – to resolve claims that senior executives of these companies entered into agreements not to poach employees of other tech companies. Although those cases were resolved through civil consent decrees, the DOJ has now stated its intent to bring criminal prosecutions in appropriate circumstances, in addition to civil enforcement.
The guidance and accompanying press release reveal the US agencies' determination to scrutinise the employment arena and their intention to use, if necessary, their most powerful enforcement tools, including criminal prosecution. According to the Antitrust Division's acting assistant attorney general, Renata Hesse:
"Antitrust violations in the employment area can greatly harm employees and impact earnings over the course of their entire careers. HR professionals need to understand that these violations can lead to severe consequences, including criminal prosecution."
Global corporations should consider this US development carefully and ensure that HR has been adequately covered in their antitrust compliance programmes.
Wage-fixing and no-poaching agreements
The guidance states that an individual is likely violating the antitrust laws if he or she:
"agrees with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range (so-called 'wage-fixing' agreements); or agrees with individual(s) at another company to refuse to solicit or hire that other company's employees (so-called 'no poaching' agreements)."
Importantly, no formal agreement is necessary to breach the antitrust laws. It is enough that there is evidence of discussions and parallel behaviour which may lead to an inference that the individual agreed to limit employee compensation or recruiting.
The guidance highlights the US agencies' view that naked wage-fixing and no-poaching agreements are per se illegal infringements of antitrust law, meaning that the agreement is deemed illegal without any inquiry into its competitive effects. It notes that:
"Going forward the DOJ intends to proceed criminally against naked wage-fixing or no poaching agreements. These types of agreements eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers, which have been traditionally investigated and prosecuted as hardcore cartel conduct."
It states that a criminal investigation could involve bringing "criminal, felony charges against the culpable participants in the agreement, including both individuals and companies".
To date, the DOJ has not pursued HR-related agreements as criminal violations, but both agencies have taken several civil enforcement actions in recent years. For example, the DOJ filed a civil enforcement action leading to a consent judgment against the Arizona Hospital and Healthcare Association for acting on behalf of most hospitals in Arizona to set a uniform bill rate schedule that each hospital would pay for temporary and per diem nurses, in addition to the cases against tech companies referenced above.
The guidance explains that sharing information with competitors about terms and conditions of employment can also breach antitrust laws. It notes that:
"While agreements to share information are not per se illegal and therefore not prosecuted criminally, they may be subject to civil antitrust liability when they have, or are likely to have, an anticompetitive effect."
The guidance also reiterates the US agencies' view that "exchanging competitively sensitive information could serve as evidence of an implicit illegal agreement".
According to the US agencies, however, an information exchange may be lawful if:
- a neutral third party manages the exchange;
- the exchange information is relatively old;
- the information is aggregated to protect the identity of the underlying sources; and
- enough sources are aggregated to prevent competitors from linking particular data to an individual source.
The publication of these guidelines serves as a reminder for companies to ensure that HR personnel have been adequately included within antitrust compliance programmes. While sales and marketing personnel commonly attend antitrust compliance training, this may not be the case for members of the HR department. Certain risk areas may not be obvious for HR professionals. For example, HR may not understand that certain types of HR information are competitively sensitive, or that the one-off provision of information given orally to a competitor over the telephone or at a meeting could serve as evidence of an implicit illegal agreement.
For further information on this topic please contact Benjamin F Holt or Janet McDavid at Hogan Lovells US LLP's Washington DC office by telephone (+1 202 637 5600) or email (firstname.lastname@example.org or email@example.com). Alternatively, contact Adrian Emch at Hogan Lovells International LLP's Beijing office by telephone (+86 10 6582 9488) or email (firstname.lastname@example.org). The Hogan Lovells website can be accessed at www.hoganlovells.com.
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