After years of filing civil enforcement actions against companies, hospitals, and various employer groups for entering into a variety of schemes to suppress employee wages, the Antitrust Division of the Department of Justice and the Federal Trade Commission have made it clear that naked wage-fixing or no-poaching agreements among employers are per se illegal. Going forward, the Antitrust Division has announced that it will criminally prosecute such agreements. Moving from civil to criminal enforcement of certain conduct is not an uncommon practice for the Antitrust Division (for example, DOJ recently criminally prosecuted an individual who was accused of destroying documents relevant to a merger investigation; previously, such conduct was prosecuted civilly).
On October 21, the Antitrust Division of the Department of Justice and the Federal Trade Commission released an “Antitrust Guidance for Human Resource Professionals.” The stated purpose of the publication was to alert HR professionals that agreements among competing employers to limit or fix the terms of employment for potential hires may violate the antitrust laws if the agreement constrains individual firm decision making with respect to: (i) wages, salaries or benefits; (ii) terms of employment; or (iii) even job opportunities.
The agencies noted that firms that compete to hire or retain employees are competitors in the employment market, regardless of whether the firms make the same products or compete to provide the same services. It is illegal for competitors to expressly or implicitly agree not to compete with one another for employees, even if they are motivated by a desire to reduce costs.
The agencies specifically described fact patterns that would likely violate the antitrust laws, and noted that illegal agreements can be formal or informal, written or unwritten, spoken or unspoken:
- Agreements among employees not to recruit certain employees or not to compete on terms of compensation are illegal.
- An individual is likely breaking 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 with 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)
Moreover, sharing sensitive information about terms and conditions of employment with competitors can also run afoul of the antitrust laws. For example, the Antitrust Division sued the Utah Society for Healthcare Human Resources Administration, a society of HR professionals at Utah hospitals, for conspiring to exchange nonpublic, prospective and current wage information about registered nurses. The exchange had the effect of keeping the pay of nurses in Utah artificially low.
However, not all information exchanges between parties are illegal. If participants to an agreement are parties to a proposed merger or acquisition, or are otherwise involved in a joint venture, it is possible to exchange information in a way that conforms with the antitrust laws.