United States: U.S. Antitrust Enforcers Release Antitrust Guidance For HR Professionals And Announce Intent To Proceed Criminally Against Naked Wage-Fixing And No-Poaching Agreements

The U.S. Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission (FTC) recently released joint antitrust guidance alerting managers and human resource (HR) professionals on how to avoid antitrust issues in hiring and compensation practices. The guidance addresses so-called "no-poaching" agreements, other agreements among employers to limit or fix wages or other terms of employment, as well information exchanges about these subjects. Most notably, the guidance states that the DOJ intends to proceed criminally against "naked" wage-fixing and no-poaching agreements. Entering these agreements poses significant risks for both companies and their employees and should prompt renewed attention to these issues in compliance training. Potential criminal treatment of HR activities also raises complex questions regarding when companies and individuals should consider taking advantage of the DOJ's leniency program.

Potential criminal prosecution of agreements on recruitment of employees and terms of employment

Wage-fixing agreements seek to limit or fix employee salary, compensation, or benefits, either at a specific or general level. An illegal agreement also could include agreements on other terms and conditions of employment, such as job benefits (employees' perks and subsidies) that are part of the total compensation package. No-poaching agreements include scenarios when individuals from different companies refuse to either solicit or hire each other's employees.

Wage-fixing and no-poaching agreements have triggered both government enforcement actions and private litigation. Following a 2009 DOJ investigation of alleged anti-solicitation agreements in Silicon Valley, a class action suit was filed against Apple, Intel, and other high-tech companies alleging that senior executives conspired to suppress wages by agreeing not to solicit each other's employees. Plaintiffs' expert estimated damages of $3 billion, which would be trebled to $9 billion under the antitrust laws. Ultimately, defendants settled the class action for $435 million. More recently, class actions involving no-poaching agreements have been brought against companies in other industries, including major animation studios (Disney, LucasFilm, Pixar, DreamWorks) and Duke Medical School. A class action complaint was filed last month against Samsung Electronics and LG Corp., based in part on a recruiter's statement that he was forbidden to solicit LG employees due to a no-poaching agreement involving the companies' executives.

According to the DOJ/FTC guidance, "naked" wage-fixing and no-poaching agreements among employers will be viewed as per se illegal under antitrust laws, that is, condemned without the need to show actual anticompetitive effects. A "naked" agreement is one that is not part of or reasonably necessary to advance a larger legitimate collaboration between employers, such as participation in a joint venture.

In the past, the federal agencies have brought civil enforcement actions challenging alleged no-poaching and wage-fixing agreements. However, the new guidance makes clear that, going forward, DOJ will criminally investigate allegations that employers have agreed to fix compensation or not solicit or hire each others' employees. If an investigation uncovers evidence of a "naked" agreement, DOJ may exercise its prosecutorial discretion and pursue criminal charges against culpable individuals and companies.

The guidance concludes with a question and answer section that includes several hypothetical scenarios, but leaves unresolved important questions:

  • What factors will DOJ take into account in exercising its prosecutorial discretion to pursue criminal or civil charges challenging alleged no-poach or compensation agreements?
  • Will DOJ take the position that the policy applies to conduct that has already occurred, since it states that it will pursue criminal investigations "going forward"?
  • Will DOJ undertake criminal investigations of non-solicitation or compensation-related agreements that are related to some underlying collaboration between employers (e.g., a joint R&D agreement), but may be overbroad in some way (e.g., the scope of employees covered by or the duration of the agreement)?

Agreements to exchange HR-related information

The agencies also provided guidance on permissible HR information exchanges among employers. While noting that "agreements to share information are not per se illegal, and therefore not prosecuted criminally," the DOJ/FTC guidance states that information exchanges "may be subject to civil antitrust liability when they have, or likely to have, an anticompetitive effect." Thus, for example, evidence that two or more companies periodically agreed to share current or future wage and other compensation information in an industry could violate antitrust laws.

Not all information exchanges are illegal. Companies can implement safeguards to obtain limited competitively-sensitive information in the course of merger or acquisition discussions. In these and other cases where there is a legitimate basis for the information exchange, companies can lessen antitrust concerns by following certain procedures, such as:

  • hiring a neutral third party to manage the exchange of nonpublic, company-specific information,
  • aggregating information such that recipients cannot identify the particular source,
  • aggregating sources to prevent competitors from linking particular data on compensation or benefits to an individual employer, or
  • exchanging relatively old compensation information.

The DOJ/FTC guidance highlights the need for antitrust review of HR practices and appropriate training for HR professionals. Employers should consult with antitrust and labor counsel before sharing hiring and compensation information and to ensure their employment agreements do not contain potentially unlawful restrictions.

The antitrust guidance for human resource professionals can be found on the DOJ's website. For more guidance on competitor information exchanges, employers should refer to the agencies' Statements of Antitrust Enforcement in Health Care, which have been applied outside of the health care industry and which the agencies have endorsed in their guidance. Our prior alerts provide further information on  employment agreements and  DOJ enforcement actions against corporate executives and employees.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.