DOJ and FTC provide guidance on avoiding antitrust violations in Human Resources practices
The Department of Justice (DOJ) and the Federal Trade Commission (FTC) last week issued antitrust guidelines for human resources (HR) professionals. The guidelines highlight the most common antitrust violations, based on a review of cases in which federal antitrust agencies have taken enforcement actions against employers. There are three main takeaways from this guidance. First, the DOJ and FTC maintain that antitrust laws apply to the employment marketplace with the same force as to other industries. Second, the agencies state that companies should avoid agreements with competitors on compensation and recruitment. Third, the agencies advise competitors not to share sensitive information where such sharing would have an anticompetitive effect. We discuss the principal statements contained in the guidelines in more detail below.
1) The antitrust laws establish the rules of a competitive employment marketplace
The agencies explain that “competition among employers helps actual and potential employees through higher wages, better benefits, or other terms of employment.” According to the agencies, “[c]onsumers can also gain from competition among employers because a more competitive workforce may create more or better goods and services.” Therefore, the agencies say, “[i]t 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 agencies warn that HR professionals found to have violated the antitrust laws can face severe consequences. They specify that the DOJ could bring criminal charges against these individuals and their companies, and that both the DOJ and FTC could bring civil actions. They also point out that a private plaintiff injured by the antitrust violation could bring suit for treble damages, or three times the damages suffered.
2) Agreements among employers not to recruit certain employees or not to compete on terms of compensation are illegal
The agencies advise that wage-fixing and “no poaching” agreements are of particular concern. They describe a wage-fixing agreement as a deal with individuals at a competing company about “employee salary or other terms of compensation, either at a specific level or within a range.” They also state that in addition to salary, compensation includes job benefits like gym membership, parking, transit subsidies, meals, or meal subsidies and similar perks. The guidelines describe a “no poaching” agreement as a pact with a competitor’s HR professionals “to refuse to solicit or hire that other company’s employees.” The agencies contend that such agreements are illegal whether “informal or formal, written or unwritten, spoken or unspoken.”
3) Avoid sharing sensitive information with competitors
The agencies caution that sharing competitively sensitive information can also run afoul of the antitrust laws. For example, sharing information about terms and conditions of employment with competitors may violate the antitrust laws, as such an exchange could be seen as evidence of an implicit illegal agreement. The agencies acknowledge that “agreements merely to share information are not per se illegal and are ordinarily subject only to civil investigation and enforcement,” but warn that “they too may be illegal when they are likely to have an anticompetitive effect.”
The guidelines specify a handful of scenarios where the sharing of information is less likely to give rise to antitrust liability. For example, an exchange of limited competitively sensitive information in the course of determining whether to pursue a merger or acquisition or of relatively old information may be permissible. However, companies should exercise caution; the agencies have taken the position that sharing information about terms and conditions of employment poses an antitrust risk even if the companies are parties to a proposed merger or acquisition, or are otherwise involved in a joint venture or other collaborative activity.
While the guidelines are only the agencies’ views of the antitrust laws, they are likely to carry considerable weight with any court, and provide a direct window into the DOJ’s and FTC’s thinking. A careful review of the guidelines will therefore be important for HR professionals to ensure they steer clear of potential violations of the antitrust laws.