Recently, the U.S. Department of Justice ("DOJ") successfully sued several employers for no-poach agreements in which they agreed to not hire each others' employees and agreements to fix compensation for employees. Coming off these victories, the DOJ and Federal Trade Commission ("FTC") issued a joint guidance for HR professionals on October 20, 2016, warning them that certain agreements to fix salaries or limit competition by refusing to hire competitors' employees, could amount to violations of federal anti-trust laws and result in civil and criminal penalties. The guidance also announced that the DOJ would "criminally investigate allegations that employers have agreed among themselves on employee compensation or not to solicit or hire each other's employees." Previously, the agencies had brought only civil cases against offenders and settled for conduct sanctions or conduct sanctions and money damages. Now, however, the DOJ intends to exercise its criminal enforcement power to prosecute this behavior.
The Guidance focuses on three different types of agreements that the federal government believes is illegal. First, it warns against agreements to fix salaries or benefits at artificially low levels. Second, it declares as illegal "no-poaching" agreements in which competitors refuse to solicit or hire each others' employees. These agreements can be written or oral. The DOJ's position is that these types of agreements "eliminate competition in the same irredeemable way as agreements to fix products or allocate customers, which have traditionally been criminally investigated and prosecuted as hardcore cartel conduct."
The Guidance also warns that sharing competitively sensitive information about hiring and compensation may also be illegal to the extent that this can facilitate illegal agreements not to hire or to suppress compensation. It identified certain "red flags" for antitrust scrutiny, such as participating in a trade association meeting where sensitive employment information is shared, discussing sensitive employment information with colleagues at other companies, and receiving documents from a competitor with internal employee compensation information. Agreements to share information are not per se illegal and will not be prosecuted as a criminal violation. However, they could attract DOJ scrutiny and civil liability.
The Bottom Line: The Guidance should be read and studied not just by HR professionals but also by corporate counsel and operations leaders. Further, legal counsel should make sure that the company representatives who participate in industry organizations are compliant with federal and state law. Similarly, a determination should be made as to whether the company is a party to any oral or written agreements that could be interpreted as violating anti-trust laws. Finally, both operational leaders and the company's HR professionals should be trained in anti-trust compliance so that they can recognize and avoid violations.