Following up on a string of civil enforcement actions and employee antitrust suits, regarding no-poaching agreements in the technology industry, on October 20, 2016 the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) issued Antitrust Guidance for Human Resources Professionals (the “Guidance”). The Guidance outlines an aggressive policy to investigate and punish employers, and individual human resources employees who enter into unlawful agreements concerning employee recruitment or retention.
The Guidance focuses on three types of antitrust violations:
- Wage fixing agreements: agreements among employers to fix employee compensation or other terms or conditions of employment at either a specific level or within a range;
- No poaching agreements: certain agreements among employers not to solicit or hire one another’s employees not ancillary to an overarching pro-competitive collaboration; and
- Unlawful information exchanges: exchanges of competitively sensitive information which facilitate wage matching among market participants.
“Naked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third-party intermediary, are per se illegal under the antitrust laws. That means that if the agreement is separate from or not reasonably necessary to a larger legitimate collaboration between the employers, the agreement is deemed illegal without any inquiry into its competitive effects.” The Guidance goes on to warn 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 traditionally been investigated and prosecuted as hardcore cartel conduct.”
“Even if an individual does not agree explicitly to fix compensation or other terms of employment, exchanging competitively sensitive information could serve as evidence of an implicit illegal agreement.” Information sharing agreements which have anticompetitive effects are subject to civil antitrust liability, including treble damages (a monetary penalty of three times the amount of the actual damages suffered). The FTC has taken the position that “merely inviting a competitor to enter into an illegal agreement may be an antitrust violation—even if the invitation does not result in an agreement to fix wages or otherwise limit competition.”
Antitrust Red Flags
In addition to the Guidance, the FTC and DOJ issued a list of Antitrust Red Flags for Employment Practices that human resources professionals should look out for in the employment setting. Red flags include:
- Agreements with another company about employee salary or other terms of compensation either at a specific level or within a range;
- Agreements with another company to refuse to solicit or hire that other company’s employees;
- Agreements with another company about employee benefits;
- Agreements with another company on other terms of employment;
- Expressing to competitors that they should not compete too aggressively for employees;
- Exchanging company-specific information about employee compensation or terms of employment with another company;
- Participating in a meeting, including a trade association meeting, where the above topics are discussed;
- Discussing the above topics with colleagues at other companies, including during social events or in other non-professional settings; and
- Receiving documents that contain another company’s internal data about employee compensation or benefits.
The above conduct is not necessarily unlawful in all circumstances. However, best practice is to consult counsel prior to engaging in this conduct to avoid antitrust law violations and if possible, restructure the agreement or information exchange to accomplish its intended legal purpose.