This past week the FTC and DOJ issued an 11-page guidance document aimed at protecting employees against anticompetitive conduct with respect to naked wage-fixing and agreements, in which companies agree on salary or other terms of compensation, and anti-poaching agreements. The guidance to human resource (“HR”) professionals and hiring managers relates to both hiring and compensation decisions.
The government’s guidance makes clear that naked wage-fixing agreements and anti-poaching agreements, in which companies agree not to recruit each other’s employees, are illegal under U.S. antitrust laws and, moving forward, DOJ will criminally investigate both individuals and companies suspected of their violation. There is a carve-out for legitimate collaboration between employers. The most common form of relevant, legitimate collaboration would be a joint venture between two companies, as these are not considered per se illegal under the antitrust laws.
Acting Assistant Attorney General Renata Hesse of the Justice Department’s Antitrust Division said “HR professionals need to understand that these violations can lead to severe consequences, including criminal prosecution. The newly released joint guidance provides HR professionals with information to prevent violations and report potentially unlawful activity, furthering the Justice Department’s commitment to protect workers from harmful conduct that stifles competition.”
Even if the companies do not enter into an explicit wage-fixing agreements, the new guidelines state that regularly or periodically sharing sensitive information regarding terms and conditions of employment (e.g., compensation information) with competing employers may be evidence of an implicit agreement in violation antitrust laws. The penalty for information-sharing that has, or has the potential to have, an anticompetitive effect is limited to civil antitrust liability. The guidance outlines examples of how companies can lawfully exchange information, including:
- Using a neutral third party to manage the exchange,
- Exchanging information that is relatively old,
- Aggregating information to protect the identity of the underlying sources and/or to prohibit the ability to link data to a particular employee, and
- Limiting information to be shared in the course of determining whether to pursue a merger or acquisition.
As part of the new guidance, the FTC and DOJ have included a limited Q&A section for various scenarios that may be encountered by HR departments While this guidance does not provide all the detail necessary to ensure compliance with antitrust laws, the agencies provided a list of “red flags” to guide HR professionals. Going forward, HR officials should exercise caution and avoid discussions regarding hiring and compensation with colleagues at competitor companies.