Human resources professionals keep track of a number of laws and regulations administered by several different agencies. For the most part, HR departments have given little attention to federal antitrust law compliance. After all, isn’t antitrust law about anticompetitive mergers, monopolies, and price-fixing cartels?
Not so fast. In late October 2016, the two agencies tasked with enforcing the federal antitrust laws – the Federal Trade Commission and the Antitrust Division of the Department of Justice (the “Agencies”) – issued “Antitrust Guidance for HR Professionals.” That guidance gives the clear message, with reference to several recent high-profile case filings, that the Agencies expect vigorous competition in the employment marketplace and that they will enforce the antitrust laws in that arena.
Antitrust lawyers and the sales and marketing department heads reading the guidance likely won’t see anything remarkable. Agreements among competitors about prices charged for products or to restrict capacity are illegal, and sharing competitively sensitive information can carry substantial risk. However, most people don’t think of wages and salaries as “price” terms that could violate the federal antitrust laws. Recognizing that this area may plow new ground for HR professionals, the guidance provides the background for the fundamental antitrust principles, outlines the specific areas of concern, and provides a number of examples that apply the legal rules.
The guidelines have several takeaways for HR professionals. First, it likely violates the antitrust laws:
- To agree with another company about employees’ salaries or other terms of competition, either at a specific level or within a range (wage-fixing agreements) or
- To agree to refuse to solicit or hire another company’s employees (no-poaching agreements)
While those types of agreements could be legal in the context of a legitimate joint venture or other efficiency-enhancing collaboration, a “naked” wage-fixing or no-poaching agreement is per se illegal.
Second, HR professionals (not just the offending company) can be individually liable. Also, the guidelines stress that the Department of Justice intends to proceed criminally against naked wage-fixing or no-poaching agreements, seeking fines against companies and fines and prison terms for individuals involved.
Third, the guidelines address competitors sharing information about HR practices. Of course, benchmarking regarding salaries, wages, and benefits is a standard practice. However, taking cues from earlier guidance in other markets, the Agencies state that certain safeguards should be in place. A neutral third party should manage the exchange (think SHRM or another salary survey group). The exchange should not involve current information, instead information that is “relatively old.” The data must be aggregated to protect the identity of the underlying sources. Finally, enough sources must be aggregated to prevent competitors from linking particular data to its underlying source.
Finally, the guidance reinforces the legal rules with a number of examples that do not involve the classic price-fixing agreement reached in the proverbial “smoke-filled room.” Instead, the examples tease out the potential beginnings of per se illegal wage-fixing and no-poaching agreements from comments at trade shows and other everyday events. For example, “A colleague at a competing firm suggested that we deal with this problem [of recent hires jumping ship] by agreeing not to recruit or hire each other’s employees.” Or, in another example, “Over lunch, my friend [a manager at a competitor] proposed we could . . . reach out to other industry leaders to establish a more reasonable pay scale for our employees.” Both comments show a clear invitation to enter into a per se illegal agreement. We suggest you review the examples.
Recent enforcement actions in the health care (Arizona Hospital & Healthcare Association) and technology industries (Apple, Google, Intel, Pixar) show that the Agencies are increasing their enforcement posture with regard to HR issues. This Agency guidance provides some transparency about their application of fundamental antitrust principles to the HR arena. So, brush up on your antitrust rules.