The Department of Justice (DOJ) and Federal Trade Commission (FTC) have issued an Antitrust Guidance for HR Professionals (Guidance) intended to alert professionals involved in hiring and compensation decisions to potential violations of the antitrust laws. This Guidance is the result of the infamous anti-poaching agreements among Intel, Google, Apple, and other heavyweights of the tech industry, which came to light in 2010 during the DOJ investigation and a follow-on civil class action involving 64,000 employees of such companies that settled in September of last year.
The Guidance can be boiled down to the following rules for HR professionals:
- Companies that compete for hiring employees from the same labor pool are competitors regardless of whether they sell the same products or provide the same services
- It is unlawful for competitors to agree not to compete with each other on employee compensation or hiring; therefore, companies may not agree – expressly or implicitly – in writing or orally – not to poach each other's employees or to set salaries or benefits of their employees
- HR professionals are "likely" breaking the antitrust laws if they:
- agree with individuals at a competing company about employee salary or other terms of compensation, either at a specific level or within a range (wage-fixing agreement), or
- agree with individuals at a competing company to refuse to solicit or hire that other company's employees ("no poaching" agreements)
- HR professionals should avoid sharing sensitive, non-public wage information with competitors as it could serve as evidence of an implicit illegal agreement (especially where it causes companies to match each other's arrangement)
What are the consequences of violating the antitrust rules? The DOJ may bring a felony criminal prosecution against individuals involved in anti-poaching or wage-fixing agreements, the company, or both. Additionally, individual employees may bring a civil suit for three times the damages they suffered.
Takeaway for HR professionals: It is well-known that price-fixing for goods and services is illegal, i.e., competing companies cannot get together and agree to charge consumers a certain price for certain goods or services in the market. The Guidance makes it clear that competing employers' agreements on employee wages or hiring restrictions is just as illegal and will be prosecuted.
What effect does this have on non-compete agreements? Depending on the state or jurisdiction, companies may still enter into such agreements with their employees (i.e., they are enforceable in Texas but not California). However, the Guidance makes clear that companies cannot agree with other competing companies on the terms of such non-compete agreements. For example, Companies A and B, which are competing for the same employees, cannot enter into an agreement that they both will tie up their employees with no less than a 2-year, 30-mile non-compete agreement or that the non-compete specifically will prohibit employees from working for Company A (if they worked for Company B), and vice versa.
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