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U.S. FTC and DOJ Issue Joint Guidance for HR Professionals Warning of Criminal Liability for Wage-Fixing and No-Poaching Agreements

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On October 20, 2016, the U.S. DOJ and FTC issued antitrust guidance for human resource (HR) professionals and others who are involved in hiring and compensation decisions. In addition to stating the general, well accepted principle that agreements between employers not to poach each others’ employees or to fix salaries or benefits may be unlawful antitrust violations, the guidance is particularly noteworthy in that  going forward it warns of criminal prosecution by the DOJ against companies, HR professionals and other individuals for “naked” wage-fixing or no-poaching agreements that are per se illegal. It also encourages companies, HR professionals and other individuals to quickly report antitrust violations to the DOJ under its Corporate and Individual Leniency Policies. This policy marks a departure from past DOJ practices, in which no-poach agreements were addressed through civil enforcement actions. For example, in the recent past, the DOJ secured civil consent judgments against technology companies for agreements not to solicit employees across competing companies. The guidance also encourages reports to the DOJ through the Citizen Complaint Center and to the FTC through the Bureau of Competition’s Office of Policy and Coordination.

The guidance is intended to provide HR professionals with information to prevent antitrust violations and report potentially unlawful activity to the DOJ. In particular, the guidance states employers that compete to hire or retain the same employees are “competitors” from an antitrust perspective, regardless of whether the companies make the same products or provide the same services. The guidance describes two types of antitrust violations:

  • wage-fixing agreements: agreements between employers to set wages, establish a pay scale, or to offer or not offer particular benefits or other terms of compensation; or
  • no poaching agreements: agreements between employers not to solicit, recruit or hire each others’ employees.

The guidance indicates that the DOJ intends to investigate criminally as hardcore cartel conduct “naked no-poaching and wage-fixing agreements that are unrelated or unnecessary to a larger legitimate collaboration between the employers.” The guidance also discusses how the antitrust laws apply to the sharing of competitively sensitive nonpublic information between employers, such as compensation information, either directly or through third party entities. The guidance includes a question and answer section that explains how the antitrust laws apply to various scenarios, including agreements not to recruit or hire, hiring a common consultant to communicate a common pay scale, agreeing to a wage cap for certain employees, reporting anticompetitive agreements to the DOJ under its Corporate Leniency Policy, conducting surveys about industry wages, and attending professional conferences. It also provides a quick reference guide that all HR professionals can utilize.

The guidance clearly sets forth general, well-established principles:

  • An agreement among competing employers to limit or fix the terms of employment for potential hires may violate the antitrust laws if the agreement constrains individual decision-making with regard to wages, salaries, or benefits, terms of employment, or even job opportunities.
  • Any company, acting on its own, may make decisions regarding hiring, soliciting or recruiting employees, but should not communicate its policies or decisions with other companies hiring the same types of employees.
  • While agreements merely to share information are not per se illegal and are ordinarily subject only to civil investigation and enforcement, they too may be illegal when they are likely to have an anticompetitive effect. Interactions with other employers, therefore, must not result in an agreement not to compete for employees or to fix particular terms of employment.
  • It is possible to design and carry out information exchanges in ways that conform with the antitrust laws, such as the common request by companies to third party analysis firms for surveys of aggregated salary and job related data. For example, the guidance  states an information exchange may be lawful if:
    1. a neutral third party manages the exchange,
    2. the exchange involves information that is relatively old,
    3. the information is aggregated to protect the identity of the underlying sources (e., it is not company specific), and
    4. enough sources are aggregated to prevent competitors from linking particular data to an individual source.
  • Even if the participants are parties to a proposed merger or acquisition, or are otherwise involved in a joint venture or other collaborative activity, there is antitrust risk if they share information about terms and conditions of employment.
  • In the course of determining whether to pursue a merger or acquisition, a buyer may need to obtain limited competitively sensitive information. Such information gathering may be lawful if it is in connection with a legitimate merger or acquisition proposal and appropriate precautions are taken.

The guidance also encourages companies and HR professionals that have questions about sharing information or otherwise collaborating with competitors to seek a business review letter from the DOJ or an advisory opinion from the FTC.

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Author

Roxane Busey is a partner in Baker & McKenzie's Chicago Office. She has more than 30 years of experience advising companies on a broad range of antitrust issues. She has been recognized as a leading antitrust authority by notable legal directories and publications including Chambers USA, Global Competition Review, America’s Leading Business Lawyers, The Best Lawyers in America, Who’s Who in the World and Illinois Top 10 Women Lawyers. Ms. Busey also served as chair of the ABA Antitrust Section from 2001-2002.

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Fiona Carlin is the head of the EU Competition & Regulatory Affairs practice in Brussels. She is the former Chief Executive of much of Baker McKenzie’s EMEA Region and the former Chair of the Firm’s Global Competition and Antitrust Law Practice comprising more than 320 lawyers in over 40 countries. She has remained an active practitioner throughout her various leadership roles with a particular focus on regulated industries.
Fiona is also the Chair of the European Advisory Board of Catalyst, a leading non-profit organisation dedicated to expanding opportunities for women and business. She was a founding and long-standing member of Baker McKenzie's Global Diversity & Inclusion Committee and is dedicated to creating an inclusive high performance culture where the talent of our lawyers and business professionals can flourish.
Fiona has been listed in "The International Who’s Who of Competition Lawyers" since 2009, and is among Global Competition Review's Top 100 Women in Antitrust. Chambers quotes clients as citing her "legal and pragmatic advice" and describing her as "globally minded".

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Mark H. Hamer is Global Chair of the Firm's Antitrust & Competition Practice Group, comprised of over 300 competition lawyers in over 60 offices across 43 countries. Mark has over 25 years of wide-ranging litigation experience, including first-chair roles in jury trials, bench trials and arbitrations. His primary focus is antitrust litigation. Before joining Baker McKenzie, Mark was a successful trial attorney in the Antitrust Division of the US Department of Justice. He was involved in some of the DOJ's highest-profile antitrust trials. Before joining the DOJ, Mark was a partner at another global law firm where he handled complex multidistrict antitrust class actions in courts across the nation.

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Cynthia Jackson is a partner in the Compliance Group in Baker & McKenzie's Palo Alto office. She has over 35 years of experience working on domestic and international employment counseling and litigation. Ms. Jackson is recognized as a "Leader in her Field" by Chambers USA. She is also recognized by Legal 500, Best Lawyers of America, Northern California Super Lawyers and America’s Leading Lawyers for Business. Her articles have appeared in numerous publications, including The San Francisco and Los Angeles Daily Journal and Financier Worldwide. She is also a frequent speaker for various seminars and institutions, such as the Association of Corporate Counsel, Bay Area Council and Sciences Politiques (Paris).

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Celina Joachim is a partner in Baker McKenzie's Houston office and certified in labor and employment law by the Texas Board of Legal Specialization. She represents management in all aspects of labor and employment law, including employment arbitration, litigation, counseling, and traditional labor law. Ms. Joachim rejoined Baker McKenzie in July 2015 after serving as in-house labor/employment and litigation counsel at a leading energy company, where she managed employment and commercial litigation matters across the country. She currently serves as one of the Houston office co-chairs for the Diversity Committee and remains active in the Firm’s pro bono endeavors.

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