On October 20, 2016, the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) (collectively the “Agencies”), who jointly enforce the antitrust laws, alerted human resource (“H.R.”) professionals that they might violate the antitrust laws by agreeing with competitors on the terms on which they will hire potential employees. The Guidelines are a reminder to H.R. professionals that they are competing with each other in the hiring of potential employees. The antitrust laws therefore extend to agreements affecting individual firms’ decisions regarding wages, salaries, benefits, terms of employment or job opportunities.
Under the U.S. antitrust laws, it is unlawful to enter into an agreement with a competitor that unreasonably restrains trade. From an antitrust perspective, firms that compete to hire or retain employees may be competitors in the employment market, even though those firms may not make competing products or offer competing services. For instance, companies in many different industries all compete to employ IT personnel.
In general, it is against the antitrust laws for competitors to agree on how they will do their separate business. More particularly, in the H.R. context, an H.R. professional is likely breaking the law if he or she makes a “wage fixing” agreement with someone at another company regarding employees’ salaries or other terms of compensation whether at a specific level or within a range. Similarly, an H.R. professional is likely breaking the law by entering into a “no poaching” agreement agreeing with another employer that he or she will not solicit or hire any of the other employers’ employees. For purposes of this discussion, such agreements need not be formal, oral or written but rather may be inferred from parallel behavior or from discussions among employers about compensation and poaching.
So called naked restraints, such as “wage fixing” and “no poaching” agreements are illegal per se because they are not part of larger legitimate collaboration by employers. Illegal per se means that such arrangements are conclusively presumed to unreasonably restrain trade and are unlawful without regard to their actual effect on competition. Legitimate joint ventures, by contrast, are not considered illegal per se under the antitrust laws. They can be defended on the basis that the collaboration has a net pro-competitive effect.
As in other areas of antitrust enforcement, the DOJ has stated its intention to prosecute criminally those agreeing to naked wage-fixing or no-poaching agreements. In such cases, the DOJ may bring criminal felony charges against not only companies, but also individuals who are deemed culpable participants in such an arrangement.
The Guidelines also emphasize that sharing information with competitors about the terms and conditions of employment can be problematic. The mere fact that H.R. professionals at competing companies have shared information about the specifics of their employment practices could be used as evidence of an implicit illegal agreement. Sharing information is not necessarily illegal, but can be if it has an anti-competitive effect or is likely to have such an effect. This is even true when the employers who are sharing information are parties to a proposed merger.
Information exchanges for bench marking and similar purposes may be permissible. Factors that the Agencies will consider in assessing such arrangements include:
- whether the exchange is managed by a neutral third party; and
- whether the information is aggregated such that its source cannot be identified.
Going forward, given these Guidelines, it would be wise to include H.R. professionals in antitrust compliance training. Companies should also consider conducting an internal review by experienced antitrust counsel of their employment practices to ensure that those practices are in compliance with the antitrust laws.