Administration Issues Antitrust Guidance for HR Professionals
On October 20, the U.S. Department of Justice (DOJ)’s Antitrust Division and the Federal Trade Commission (FTC) issued guidance to human resources professionals and others involved in hiring decisions about potential violations of antitrust laws. The guidance focuses on hiring and compensation matters and should be read carefully by HR professionals, as DOJ and FTC consider “HR professionals [to be] in the best position to ensure that their companies’ hiring practices comply with the antitrust laws” and that “HR professionals can implement safeguards to prevent inappropriate discussions or agreements with other firms seeking to hire the same employees.”
The guidance is based on previous enforcement actions the agencies have taken against employers who have “agreed not to compete for employees” and sets forth basic principles that HR professionals can follow in order to avoid running afoul of antitrust laws. These include scenarios under which individuals would likely break antitrust laws, such as entering into wage-fixing agreements (by agreeing “with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range”) or no-poaching agreements (by agreeing “with individual(s) at another company to refuse to solicit or hire that other company’s employees”). Of note here is that it does not matter what form this agreement takes, whether it is “informal or formal, written or unwritten, spoken or unspoken.”
The agencies also note that there are circumstances where information sharing between employers is legal. The agency states that such information exchanges may be legal if “a neutral third party manages the exchange, the exchange involves information that is relatively old, the information is aggregated to protect the identity of the underlying sources, and enough sources are aggregated to prevent competitors from linking particular data to an individual source.”
The guidance also includes a question-and-answer section which identifies common scenarios and employment practices which may violate antitrust laws. Interestingly enough, one such scenario that is posed in the Q&A is from the HR department of a university where the hypothetical university in question had entered into a “gentleman’s agreement” with another university not to recruit each other’s senior faculty. The answer in this case makes it clear that such an agreement is illegal and that the agencies could criminally investigate and prosecute both the institutions and individuals involved in the agreement.
Although this specific case is not highlighted in the response, it appears that a recent lawsuit involving Duke University and University of North Carolina Chapel Hill — where it is alleged that the two institutions entered into such a gentleman’s agreement not to recruit one another’s employees — may be the type of agreement the agencies are trying to prohibit. If HR professionals find themselves in such a situation, the FTC and DOJ encourage them to self-report, as criminal charges will not be brought against individuals and employers if they are the first qualifying corporation or individual to report the antitrust offense. These leniency programs are described in length here.
Although it is unclear what prompted the DOJ and FTC to issue this guidance, it appears that a lack of wage gains may be behind the increased scrutiny in this area. As the guidance points out, “just as competition among sellers in an open marketplace gives consumers the benefits of lower prices … competition among employers helps actual and potential employees through higher wages, better benefits or other terms of employment.” Indeed, a recent op-ed in The Wall Street Journal written by Jason Furman, the chairman of President Obama’s Council of Economic Advisors, points to the use of monopsony power, “when a buyer, rather than a seller, has sufficient market power to set its own price,” and wage collusion among employers to “hold down workers’ paychecks, depress overall hiring and output, and slow labor turnover.”
What is clear is that the agencies are changing their enforcement policies and will now “proceed criminally against naked wage-fixing or no-poaching agreements [and] bring criminal felony charges against the culpable participants in the agreement, including both individuals and companies.” To that end it is paramount that HR professionals read this guidance carefully and consult the additional guidance on information exchanges among competitors and the red flag list the agencies have prepared.