Employers Beware - DOJ and FTC Issue Antitrust Guidance to HR Professionals

The Guidance marks an evolution – and potential escalation – of federal antitrust enforcement challenges to companies’ (1) naked “wage-fixing” and “no-poaching” agreements; and (2) improper exchanges of nonpublic information concerning employee compensation and other terms of employment. The DOJ and FTC jointly issued this Guidance to HR Professionals because it is often the HR Professionals who are in the best position to ensure compliance and implement safeguards.

The DOJ and FTC maintain that companies that compete to hire or retain employees are competitors in the employment marketplace, whether or not they compete with one another downstream in the sale of their products and/or services. The antitrust agencies assert it is always illegal for companies to expressly or implicitly agree not to compete when they enter into wage-fixing and no-poaching agreements, unless such agreements are reasonably necessary to some larger legitimate collaboration (e.g. a joint venture) between the employers. Indeed, the Guidance notes that even a solicitation by one firm of another to enter into such a naked agreement may be unlawful. Finally, the DOJ and FTC remind HR Professionals that sharing nonpublic, competitively sensitive information about wages and other terms of employment with competitors – even absent any agreement between them to set such terms – in some circumstances may violate the antitrust laws.

The Guidance was issued in the wake of a number of recent civil and administrative actions brought against companies for allegedly engaging in illegal wage-fixing or entering into illegal no-poaching agreements. The DOJ has brought three cases over the last few years against various technology companies that entered into “no poach” agreements with competitors. It has also filed civil enforcement actions against the Arizona Hospital & Healthcare Association for acting on behalf of most hospitals in Arizona to set a uniform schedule hospitals would pay for temporary and per diem nurses, and against the Utah Society for Healthcare Human Resources Administration for conspiring to exchange nonpublic prospective and current wage information about registered nurses, which the DOJ alleged kept pay artificially low. Similarly, the FTC has brought two cases against companies challenging agreements aimed at reducing compensation for both nurses and models. To date, all of these challenges have ended in consent judgments.

Referencing these prior actions, the Guidance states that going forward the DOJ will “proceed criminally against naked wage-fixing or no-poaching agreements.” The DOJ and FTC assert that such agreements “whether entered into directly or through a third party intermediary, are per se illegal under the antitrust laws” and the DOJ may bring criminal, felony charges against the companies and the individuals involved. Accordingly, companies are well-advised to take note of and become familiar with the Guidance.

The Guidance offers the following specific advice for HR Professionals:

• Avoid wage-fixing agreements – agreements with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range;
• Avoid no-poaching agreements – agreements with individual(s) at another company to refuse to solicit or hire that other company’s employees;
• It does not matter whether the agreements are informal or formal or oral or written and even discussions or parallel behavior may lead to an inference of illegal activity;
• Naked wage-fixing and no-poaching agreements are per se illegal under the antitrust laws and will be deemed illegal without any inquiry into its competitive effects;
• If the agreement is necessary to a larger legitimate collaboration between the two employers – such as merger or a joint venture – then it is not per se illegal;
• Sharing information with competitors about terms and conditions of employment can run afoul of the antitrust laws because it can serve as evidence of an implicit illegal agreement;
• Agreements to share information may be subject to civil antitrust liability when they have, or are likely to have, an anticompetitive effect. There is antitrust risk even where the parties to the agreement are parties to a proposed merger or acquisition or are otherwise involved in a joint venture or other collaborative activity; and
• Parties need to share information in a very methodical and careful way to ensure compliance with antitrust laws. For example, an information exchange may be lawful if: (1) a neutral third party manages the exchange; (2) the exchange involves information that is relatively old; (3) the information is aggregated to protect the identity of the underlying sources; and (4) enough sources are aggregated to prevent competitors from linking particular data to an individual source.

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