On October 20, 2016, the Department of Justice (DOJ) and Federal Trade Commission (FTC) released “Antitrust Guidance for Human Resource Professionals” (Guidance), along with a two-page document titled “Antitrust Red Flags for Employment Practices” that lists a number of types of business conduct that involve a risk of violating the antitrust laws. The Guidance does not break new legal ground, but specifies existing areas of concern and clearly identifies future enforcement priorities in hiring practices and the exchange of employment information between competitors. The Guidance document also contains useful, plain-English hypothetical questions and answers that explain how the Guidance applies to specific workplace occurrences and situations.

The Guidance states that “an agreement 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 regard to wages, salaries, or benefits; terms of employment; or even job opportunities.” Noting that “it is unlawful for competitors to expressly or implicitly agree not to compete with one another, even if they are motivated by a desire to reduce costs,” the Guidance advises that employers and employees “should take care not to communicate the company’s policies to other companies competing to hire the same types of employees, nor ask another company to go along.”

Most notably, the Guidance bluntly states that an individual “likely is breaking the antitrust laws” if he or she agrees with individuals at another company about employee salaries or other terms of compensation; or agrees with individuals at another company to refuse to solicit or hire that other company’s employees. The Guidance asserts that “naked wage-fixing or no-poaching agreements among employers … are per se illegal under the antitrust laws.” The DOJ has prosecuted several such alleged agreements between large technology companies in recent years, and the Guidance announces that “going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements,” with action taken against the companies themselves and the culpable individual participants in the agreement.

Government Position on Information Sharing

Unlike the agreements with competitors described above, information exchanges are not “per se” illegal. According to the Guidance, sharing information with competitors about terms and conditions of employment, which includes compensation and benefits for employees, can run afoul of antitrust laws where the disclosure is likely to have an anticompetitive effect. In other words, an information exchange may have pro-competitive justifications that must be balanced against the exchange’s potentially anticompetitive impact. The Guidance states that exchanges “may be subject to civil antitrust liability when they have, or are likely to have, an anticompetitive effect.” As a specific warning, the Guidance states that the exchange of current wage information in an industry with few employers can lead to an antitrust violation where it decreases employee compensation. The FTC and DOJ have paid particular attention to exchanges of wage and employment information in the health care sector, and “Statements of Antitrust Policy in Health Care,” released in 1996, contains additional guidance about wage and employment information exchanges.

The Guidance focuses heavily on prohibitions, with little discussion of when agreements or exchanges may be permissible. This said, the Guidance observes that no-poaching agreements may be permissible between competitors where “reasonably necessary to a larger legitimate collaboration between the employers,” including joint ventures. More generally, limited no-poaching agreements are likely permissible (particularly between companies that are not otherwise direct competitors) when ancillary to a legitimate business purpose. Many business opportunities and transactions result in one participant learning detailed information about the other’s employees; a limited no-poaching agreement that prohibits parties from directly soliciting employees learned about as a result of a potential collaboration or transaction will typically qualify as reasonably ancillary.

The Guidance recommends using a neutral third party to manage the information exchange, exchanging only “relatively old” data (and not current or prospective data), and aggregating data to protect underlying sources’ identities and the linking of specific data to specific sources, techniques commonly used by trade associations and industry analysts.

The Guidance further recognizes that collecting “limited competitively sensitive” information relating to employment terms and conditions is permissible, with “appropriate precautions,” in the case of a prospective merger or acquisition. While the Guidance does not address the details of these precautions, historically, the use of confidentiality agreements, restricting the provided information to what is minimally required for due diligence, and restricting access to the information to outside counsel or to a minimum number of individuals who need to know the information to evaluate the transaction have been permissible. As an additional matter, both the FTC and the DOJ offer advance review processes allowing businesses to obtain advisory opinions regarding proposed information exchanges or other similar conduct.

What’s Next?

The Guidance highlights some of the risks that arise when competitors enter into agreements relating to employment or employment terms and conditions, or when they exchange information about employment terms and conditions. The Guidance explicitly indicates that going forward, the DOJ will focus on criminal and civil legal pursuit of companies and individuals engaged in anticompetitive agreements relating to employment and notes that the DOJ will also continue to monitor exchanges of employment information and take action where an exchange is believed to have an anticompetitive effect.

Accordingly, corporate counsel and human resources professionals should be sensitive to both their disclosure of information and to agreements with other employers relating to employment or terms and conditions of employment for particular job classifications. Employers should consider updating employment handbooks and work rules to address this issue and consider seeking counsel when contemplating entering agreements or exchanging information on employment terms and conditions with other employers.