On October 20, 2016, the Department of Justice (DOJ) Antitrust Division and Federal Trade Commission issued a guidance aimed at alerting human resources professionals on potential violations of the antitrust laws. According to a DOJ statement, the guidance is intended to “help educate and inform” HR professionals and other professionals who are involved in making hiring and compensation decisions “about how the antitrust laws apply to the employment arena.” However, when reading the guidance you would not be wrong to feel as though the document is more threatening than informative. The Antitrust Guidance For Human Resource Professionals, which targets HR professionals because they are often “in the best position to ensure that their companies’ hiring practices comply with the antitrust laws,” provides an overview of the federal antitrust laws, the types of anti-competition clauses that are illegal, and the risks of sharing sensitive information. The joint guidance also includes a Q&A section with a number of scenarios intended to help HR professionals identify unlawful activity.
The Antitrust Laws
As a preliminary matter, the guidance reminds us that it is illegal for competitors to expressly or implicitly agree not to compete with one another. The same is true in the market for employees, meaning that companies, even companies that are not in the same industry, that are competing for the services of employees are prohibited from communicating with competing companies to set terms of employment or agreeing to refrain from soliciting or hiring each other’s employees. The guidance warns HR professionals “to ensure that interactions with other employers competing with them for employees do not result in an unlawful agreement not to compete on terms of employment.”
The guidance offers general principles to follow in order to stay in compliance of antitrust laws.
1. Illegal Agreements
The guidance instructs HR professionals to avoid agreements with employers competing to hire the same employees. In particular, the guidance states that wage-fixing and no-poaching agreements are per se illegal (i.e., illegal regardless of its competitive effects):
- Wage-Fixing Agreements “with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range”
- No Poaching Agreements “with individual(s) at another company to refuse to solicit or hire that other company’s employees.”
Such agreements are illegal regardless of whether they are formal or informal, oral or written, and entered into directly or through a third party. Moreover, even in the absence of oral or written wage-fixing and no poaching agreements, “evidence of discussions and parallel behavior . . . may lead to an inference” of an agreement.
2. Wage Surveys—Sharing Sensitive Information Can Run Afoul of Antitrust Law
Conducting wage surveys among competitors or in a geographic area is a commonplace HR activity that is commonly used to help a company ensure it is paying competitive wages. However, in some circumstances, sharing information with competitors about the terms and conditions of employment may violate the antitrust laws—even in the absence of an explicit agreement to fix compensation or other terms of employment. The guidance states, evidence that two employers—in an industry with few employers—have periodically exchanged current wage information “could establish an antitrust violation because, for example, the data exchange has decreased or is likely to decrease compensation.”
The guidance outlines the circumstances in which sharing information—aka a wage survey—would not risk a violation of the antitrust laws. An information exchange may be lawful if
- it is managed by a neutral third party,
- it involves relatively old information,
- it includes information that has been aggregated to protect the identity of underlying sources, and
- it aggregates enough sources such that competitors will be prevented from linking particular data to an individual source.
Consequences of Antitrust Law Violations
The guidance expressly states that “[g]oing forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements.” Since these agreements are per se illegal, the DOJ is going to criminally investigate and where warranted bring criminal felony charges against companies and individuals involved in the agreements. For an individual, a finding of guilt can result in prison time and fines. Additionally, civil claims with treble damages (three times actual damages) are available. This includes claims from individuals who have been injured, i.e., had their employment or wage prospects negatively impacted by the anti-competitive practices.
Questions and Answers
The guidance includes seven questions and answers to help clarify which activities may put employers at risk. In one scenario, an HR colleague suggests “agreeing not to recruit or hire each other’s employees.” In another scenario, a manager at one company suggests to a manager at another company that the way to control wage growth would be to reach out to industry leaders to establish a pay scale. Yet another scenario cautions against entering into a “gentleman’s agreement” to not recruit a competitors’ employees.
The guidance urges HR professionals to report information about a possible antitrust violation to the federal antitrust agencies. In what the agencies present as an incentive or a form of good news in this guidance, it advises HR professionals that the “first to confess” participation in a criminal antitrust violation may be granted leniency in the form of no criminal conviction, no prison time and/or no fines. The guidance states that it would be beneficial to report any potentially criminal activity quickly as the DOJ’s Antitrust Division leniency program can help corporations avoid convictions and fines and can help individuals avoid criminal convictions, prison terms and fines if they are the first to confess, fully cooperate, and meet other specified conditions.