On October 20, 2016, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) jointly issued a publication entitled “Antitrust Guidance for Human Resource Professionals” which, according to the opening paragraphs, is “intended to alert human resource (HR) professionals and others involved in hiring and compensation decisions to potential violations of the antitrust laws.”
The three bold-faced headings within the guidance’s first section provide an indication of the messages being sent to employers by the DOJ and FTC and a roadmap regarding the actual takeaways of which they should be aware:
- “The antitrust laws establish the rules of a competitive employment marketplace.”
- Message: Federal antitrust agencies plan to take enforcement action against employers that agree—expressly or implicitly—with other companies not to compete for employees.
- Takeaway: Employers should avoid communicating their hiring or recruiting policies to other companies, regardless of whether the companies provide the same products or services. The effect of this guidance on noncompete agreements remains to be seen. But a hint may have come from the Obama administration’s statement, on October 26, which urged states to ban noncompete agreements in circumstances other than those proposed before a job is offered or a promotion is accepted.
- “Agreements among employers not to recruit certain employees or not to compete on terms of compensation are illegal.”
- Message: An HR person (and, therefore, the employer or company) risks action by the DOJ if an agreement is made between companies regarding salary or other terms of compensation; this applies regardless of whether the agreement is written or verbal, formal or informal.
- Takeaway: The DOJ views most stand-alone wage-fixing or “no-poaching” agreements among employers as per se illegal under the antitrust laws. Expect the DOJ to increase its criminal prosecutions of both individuals and companies involved in such agreements.
- “Avoid sharing sensitive information with competitors.”
- Message: According to the guidance, evidence of periodic exchanges of current wage information in an industry with a relatively low number of employers could establish an antitrust violation—even without an express or implicit agreement among companies.
- Takeaway: Exchanging competitively sensitive information may create implicit evidence of illegal antitrust-based agreements, and may be viewed by the DOJ as having an anticompetitive effect.
The DOJ, which will be stepping up its efforts in this arena, has established a specific “business review process” to enable companies to determine how the DOJ’s Antitrust Division will respond to any proposed joint ventures or other business activity. The DOJ has also provided a list of “Antitrust Red Flags” for HR professionals. The FTC has established a process for obtaining an advisory opinion on antitrust issues, as well.
The guidance also includes several question-and-answer scenarios and a list of resources to assist HR departments in reporting “potential violations” of the antitrust laws, including a statement that reads as follows:
Through the Division’s leniency program, corporations can avoid criminal conviction and fines, and individuals can avoid criminal conviction, prison terms, and fines, by being the first to confess participation in a criminal antitrust violation, fully cooperating with the Division, and meeting other specified conditions.
The issues raised in the guidance underscore the importance of cooperation and interaction among legal, HR, and corporate compliance departments in companies, regardless of size, geographic location, or type of business. Expect scrutiny of the issues to continue—and consider limiting huddle time with other companies, especially regarding competition for employees.
