"Going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements."1 This weighty policy statement, issued on October 20, 2016, by the United States Department of Justice, Antitrust Division ("DOJ") and the Federal Trade Commission ("FTC"), marks a significant departure from the DOJ's past enforcement practices on corporate contacts affecting competition for employees. Until now, the DOJ has limited its enforcement actions in this area to civil proceedings, extracting consent judgments from offending companies. With the policy move, however, the DOJ (and FTC) is squarely placing the bullseye on human resources personnel and other corporate employees who agree with their companies' competitors not to compete in the marketplace for employees.
With increasing regularity, companies have been the subject of government investigations and tag along civil class actions 2 stemming from alleged agreements among competitors not to compete for employees. Typically, these agreements target employee wages, recruiting, benefits, and other terms of employment. In this arena, the DOJ and FTC, in recent memory, have pursued civil enforcement actions in at least a half dozen cases against a dozen or more entities.3 These government actions primarily focused on agreements designed to suppress wage competition and to avoid "poaching" of one another's employees.4 Each of the cases ended in consent judgments whereby the defendants agreed to cease and desist from their challenged dealings with competitors.5
On October 20, 2016, the DOJ and FTC issued a policy document entitled, "Antitrust Guidance for Human Resources Professionals."6 It is a game changer. In no uncertain language, the DOJ and FTC now equate "naked wage-fixing or no-poaching agreements" to "hardcore cartel conduct" such as price fixing and agreements to allocate customers.7 Because these types of hardcore conduct lack any redeemable virtue, the DOJ now will "criminally investigate allegations that employers have agreed among themselves on employee compensation or not to solicit or hire each others' employees." And, if an "investigation uncovers a naked wage-fixing or no-poaching agreement, the DOJ may ... bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies."8 Thus, the stakes have risen from the prospect of cease and desist orders to the imposition of substantial criminal fines for corporations and individuals and, more importantly, prison terms for offending individuals that can be as long as ten (10) years.9 In light of the DOJ's focus on criminal prosecution of wage and poaching agreements, the DOJ and FTC's guidance also provides cautionary direction to corporations on the subject and, in particular, to human resources professionals – those most likely to engage in conduct that can run afoul of the antitrust laws' strictures relating to competitive activities pertaining to employees. Significantly, the DOJ and FTC accompanied their guidance with a "red flags" summary that identifies conduct that can create "antitrust concerns." The flags are as follows, warning individuals that legal issues can "arise if you or your colleagues:"
- Agree with another company about employee salary or other terms of compensation, either at a specific level or within a range.
- Agree with another company to refuse to solicit or hire that other company's employees.
- Agree with another company about employee benefits.
- Agree with another company on other terms of employment.
- Express to competitors that you should not compete too aggressively for employees.
- Exchange company-specific information about employee compensation or terms of employment with another company.
- Participate in a meeting, such as a trade association meeting, where the above topics are discussed.
- Discuss the above topics with colleagues at other companies, including during social events or in other non-professional settings.
- Receive documents that contain another company's internal data about employee compensation.10
While useful, the red flags list raises additional questions, particularly for conduct that falls into gray zones, which may best be resolved with the assistance of counsel.11 For instance, slight variation in the who, what, where, when and how of company information exchanges or trade association activities can be the difference between dealings that raise significant antitrust issues and those that are lawful and procompetitive.12 Further, determining whether an "agreement" exists often requires a complex analysis of relevant facts weighed in light of applicable law. While an agreement implicating the antitrust laws can be as simple as a writing signed by the parties, it also can exist in the absence of a written or stated oral understanding. As the Supreme Court has stated, in somewhat ambiguous language, an antitrust agreement exists when there is a "meeting of the minds."13 Moreover, even if competitors do not reach an agreement, an "invitation to collude" by one competitor to another can create its own set of legal difficulties.14 We recently addressed this related issue in an article examining competition authority treatment of such invitations in the US and EU, and encourage those who encounter their competitors in the market to review that article, including our various practical pointers for dealing with competitors.15
1. Dep't of Justice, Antitrust Div. and Federal Trade Comm'n, Antitrust Guidance for Human Resource Professionals (Oct. 2016), available at https://dlbjbjzgnk95t.cloudfront.net/0853000/853942/joint%20guidance%20ftc%20doj.pdf [hereinafter Guidance].
2. See, e.g., In re High-Tech Employee Antitrust Litigation, 11-cv-02509 (N.D. Cal.).
3. See Guidance, at 3-4.
4. See, e.g., Compl., United States v. Lucasfilm Ltd., 1:10-cv-02220 (D.D.C. Dec. 21, 2010) (alleging agreement between competitors "not to cold call, not to make counteroffers under certain circumstances, and to provide notification when making employment offers to each other's employees").
5. See, e.g., Final Judgment, United States v. Arizona Hospital and Healthcare Ass'n, CV07-1030 (D. Ariz. Sept. 12, 2007) ("essence of this Final Judgment is the prohibition of certain agreements on bill rates and competitively sensitive contract terms ....").
6. The government's guidance does not address agreements, including "non-competes," between employers and their own employees. These agreements raise separate issues under state laws. See Todd R. Seelman & Katherine M.L. Pratt, Antitrust Scrutiny of Employment Restrictive Covenants, COLO. LAW., Vol. 43 No. 10 (Oct. 2014), at 33.
7. Guidance, at 4.
8. Id. (emphasis added).
9. 15 U.S.C. § 1 (corporations can be fined up to $100 million; individuals can be fined up to $1 million and serve up to 10 years); see also Antitrust Criminal Penalty Enhancement and Reform Act of 2004, Pub. L. No. 108-237, 118 Stat. 661, 665; 18 U.S.C. § 3571(d) (alternative fine can be imposed in amounts up to "twice the gross gain or twice the gross loss" from the offense).
10. Dep't of Justice, Antitrust Div. and Federal Trade Comm'n, Antitrust Red Flags For Employment Practices (Oct. 2016), available at https://dlbjbjzgnk95t.cloudfront.net/0853000/853942/ref%20card.pdf.
11. J. Thomas Rosch, Commissioner, Federal Trade Comm'n, remarks before the ABA Section of Antitrust Law: Antitrust Issues Related to Benchmarking and Other Information Exchanges, at 4 (May 3, 2011) (the Sherman "Act is worded in broad and general terms, such that the behavior it proscribes ... 'is often difficult to distinguish from the gray zone of socially acceptable and economically justifiable business conduct.'") (quoting United States v. United States Gypsum Co., 438 U.S. 422, 440-41 (1978)).
12. See, e.g., Dep't of Justice and Federal Trade Comm'n, Statements of Antitrust Enforcement Policy in Health Care (Aug. 1996), at 49-51 (examining exchanges of price and cost information among health care providers and discussing exchanges that fall inside and outside of an "antitrust safety zone").
13. See, e.g., Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007) (examining whether plaintiffs pled a conspiratorial agreement).
14. Guidance, at 7 ("merely inviting a competitor to enter into an illegal agreement may be an antitrust violation.").
15. Christopher H. Wood, Todd R. Seelman, Robin Alexander & Johan Van Acker, "Invitations to Collude" Targeted by US and EU Enforcement, Law360 (Oct. 7, 2016), available at http://lewisbrisbois.com/newsroom/news/lewis-brisbois-trio-published-in-law360.
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