United States: DOJ, FTC Issue Antitrust Guidance To Human Resources Professionals


On October 20, 2016, the United States Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) issued joint Antitrust Guidance to Human Resource (HR) Professionals (the Guidance) involved in hiring and compensation decisions. The agencies issued the guidance to educate HR professionals about how the antitrust laws apply in the employment context.

In Depth

On October 20, 2016, the United States Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) issued joint Antitrust Guidance to Human Resource (HR) Professionals (the Guidance) involved in hiring and compensation decisions. The agencies issued the guidance to educate HR professionals about how the antitrust laws apply in the employment context.

According to DOJ and FTC, workers are harmed if companies that would ordinarily compete against each other to recruit and retain employees instead agree to fix wages or other terms of employment, or enter into so-called “no-poaching” agreements by agreeing not to recruit each other’s employees. Such practices can constitute per se violations of the antitrust laws, meaning defendant employers cannot put on any defenses once the fact of an agreement to fix wages or not to recruit is established.

Notably, the DOJ announced that it intends to investigate criminally so-called “naked” no-poaching or wage-fixing agreements that are unrelated or unnecessary to a larger legitimate collaboration between the employers. The DOJ believes that these types of agreements eliminate competition the same way as agreements to fix the prices of goods or allocate customers, which DOJ has traditionally criminally investigated and prosecuted as “hardcore cartel conduct.” Criminal prosecution can result in significant fines and debarment for employers and exposure for individuals to criminal prosecution, as outlined in DOJ’s recent “Yates Memo” on individual accountability for corporate wrongdoing. In other words, HR professionals who enter into “naked” no-poaching or wage-fixing agreements can face imprisonment in addition to individual criminal fines. Even agreements that do not constitute criminal violations may still lead to civil liability under statutes enforced by both agencies. Moreover, such agreements can also serve as the basis for private plaintiff litigation that can result in treble damages awards and attorneys’ fees.

The DOJ and FTC’s announcement comes in the wake of several lawsuits by the agencies and private plaintiffs during the last decade alleging wage-fixing or no-poach agreements in industries as diverse as health care and technology. See e.g., Clarke v. Baptist Mem’l Healthcare Corp., No. 06-cv-02377 (W.D. Tenn. filed June 20, 2006); United States v. Ariz. Hosp. and Healthcare Ass’n, No. 07-cv-01030 (D. Ariz. Sep. 12, 2007) (health care); United States v. Adobe Sys., Inc., No. 10-cv-01629 (D.D.C. filed Sep. 24, 2010) (technology); and Seaman v. Duke Univ., 15-cv-00462 (M.D.N.C. filed June 9, 2015) (health care).

Summary of the Guidance

The Guidance describes potential antitrust violations that could occur during employers’ hiring and compensation decisions. Generally, agreements between competing employers are illegal if they relate to hiring, recruiting, wages, salaries, benefits, terms of employment or even job opportunities. Even companies that do not compete in the products or services they sell will still be deemed competitors in the labor market if they compete with respect to hiring or retaining employees. The Guidance notes that violations of antitrust laws could entail a criminal prosecution by the DOJ, a civil enforcement action by the DOJ or FTC or a private civil treble damages suit.

The Guidance provides the following specific advice for HR professionals to observe:

  • Companies should refrain from engaging in “wage-fixing agreements,” which occur when individuals agree with employees at other companies about salary or other terms of compensation for employees.
  • Companies should also refrain from engaging in “no-poaching” agreements, which are agreements with individuals at other companies to refrain from hiring or soliciting employees.
  • Naked wage-fixing and no-poaching agreements that do not lead to legitimate collaboration between the companies are per se illegal under the antitrust laws, and the DOJ will criminally investigate these agreements.
  • The manner of the agreement (e.g. written or spoken) is immaterial, and circumstantial evidence, such as parallel behavior, could lead to an inference of an agreement.
  • Joint ventures and agreements that lead to legitimate collaboration between employers are not per se illegal under the antitrust laws.
  • Companies should not exchange any information about terms and conditions of employment, because sharing competitively sensitive information could serve as evidence of an implied agreement. While sharing information is not per se illegal, this behavior may run afoul of the antitrust laws if the information exchange has, or is likely to have, an anticompetitive effect in the market.
  • Companies that must exchange information must do so in a cautious and limited manner.

In addition to the Guidance, the DOJ and FTC also issued an accompanying document entitled Red Flags for Employment Practices. This non-exhaustive guide lists scenarios that should raise antitrust concerns for managers and HR processionals. These situations include:

  • Agreements with individuals at other companies about salary, compensation, hiring decisions, benefits or any other terms of employment;
  • Indications that competitors should refrain from aggressively competing for hires;
  • Exchanges of competitively sensitive information with individuals at other companies;
  • Participation in meetings or informal gatherings with competitors where employment decisions are discussed; and
  • Receipt of information about another company’s compensation information.

Key Takeaways

First, clients should take the DOJ’s and FTC’s Guidance to heart and incorporate its lessons into their antitrust compliance training programs. While clients frequently include antitrust training within their internal compliance programs, the audiences for those training programs typically focus on marketing and sales employees and may not include HR professionals. Thus, HR professionals may lack some of the antitrust sensitivity of their colleagues. Given the DOJ’s strong stance that it will investigate “naked” wage-fixing and no poach agreements criminally, it behooves clients to include HR professionals within the scope of their antitrust compliance training.

Second, the DOJ’s and FTC’s Guidance impacts common HR practices like benchmarking and compensation surveys to determine whether companies are paying competitive compensation packages to their employees. The Guidance should not be interpreted as discouraging benchmarking and participating in compensation surveys. Rather, the Guidance only proscribes certain boundaries for how HR professionals should go about benchmarking and compensation surveys to avoid antitrust risks. Indeed, the DOJ and FTC have previously issued detailed guidance to employers that they should consult on how best to exchange compensation information for benchmarking purposes in an antitrust compliant way.  See Statement 6, Provider Participation in Exchanges of Price and Cost Information, United States Dep’t of Justice & Fed. Trade Comm’n, Statements of Antitrust Enforcement Policy in Health Care (Aug. 1996).

Third, the DOJ’s and FTC’s Guidance also implicates employee non-solicitation covenants that clients frequently enter into as part of legitimate business relationships, like services agreements or non-disclosure agreements (NDAs) signed to conduct due diligence during mergers and acquisitions. So long as the non-solicitation covenants are reasonable in scope and duration, they should not raise significant antitrust risk, unlike “naked” no-poach agreements among competing employers.  For example, a non-solicitation covenant entered into as part of a services agreement between two companies should be limited to the types of employees directly involved in providing the services subject to the overall agreement and should expire as soon after the termination of the services agreement as possible. In contrast, a non-solicitation covenant that includes employees not involved in providing the services covered by the agreement and lasts several years after termination of the agreement likely raises significant antitrust risk. Likewise, a non-solicitation covenant entered into as part of an NDA to facilitate due diligence should end as soon as possible after a potential acquirer declines to merge with or acquire the target company.

With the publication of the Guidance, the DOJ and FTC have now made clear that clients need to account for antitrust compliance not just when it comes to products and services that they sell, but also for the labor they employ.

DOJ, FTC Issue Antitrust Guidance to Human Resources Professionals

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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