On October 20, 2016, the U.S. Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued guidance for human resource (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 Q&A 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-publicized interest in these issues by both U.S. antitrust agencies. Most notably, following long investigations, in 2010 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, DOJ has now stated its intention to bring criminal prosecutions in appropriate circumstances, in addition to civil enforcement.
The guidance and accompanying press release reveal the U.S. agencies' determination to scrutinize the employment arena very closely, 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 U.S. development carefully and ensure that HR has been adequately covered in their antitrust compliance programs.
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 behavior which may lead to an inference that the individual agreed to limit employee compensation or recruiting.
The guidance highlights the U.S. 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 & 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 U.S. agencies' view that "exchanging competitively sensitive information could serve as evidence of an implicit illegal agreement."
According to the U.S. 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."
Scrutiny in other jurisdictions around the world
While there are fewer examples of antitrust enforcement in the employment area outside the U.S., no-poaching agreements, wage-fixing agreements, and certain types of competitively sensitive HR information exchange are likely to breach antitrust laws in other jurisdictions as well. These practices may also infringe local labor codes. EU competition law, for example, takes a strict approach to information exchange. The Court of Justice of the European Union in the T-Mobile case has confirmed that the sharing of competitively sensitive information with competitors at a single meeting can constitute an infringement of EU competition law. Under EU competition law, the exchange of information regarding companies' individualized intentions concerning future pricing or sales intentions will constitute a restriction "by object," meaning that the impact on competition will not need to be assessed.
The publication of these U.S. guidelines serves as a reminder for companies to ensure that human resources personnel have been adequately included within antitrust compliance programs. While sales and marketing personnel commonly attend antitrust compliance trainings, 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.