By: Timothy Bergin, Partner in Litigation and Antitrust practice groups.

On October 20, 2016, the United States Department of Justice Antitrust Division and the Federal Trade Commission ("FTC") jointly issued Antitrust Guidance for Human Resource Professionals ("Guidance").  An accompanying press release by the Antitrust Division states that executives and managers "may face jail time" and, along with their employers, may incur other criminal and civil antitrust liability (including fines and damages) if they are found to have participated in an agreement or understanding with any of their counterparts in other organizations to restrain competition in recruiting or compensating employees.  In short, "[g]oing forward, the division intends to criminally investigate naked no-poaching or wage-fixing agreements unrelated or unnecessary to a larger legitimate collaboration between employers."

This heightened antitrust enforcement focus on the employment marketplace has evolved from three cases brought by the Antitrust Division in recent years challenging agreements between leading high-tech companies not to recruit each other's employees.  Earlier government cases challenged agreements among hospitals or nursing homes or fashion designers to cap compensation they paid for temporary nursing or modeling services, and challenged ethical guidelines adopted by a national hospital association restraining its members from hiring away another member's medical residents.  While all of those cases were resolved by consent orders for civil injunctive relief, the Justice Department has now given notice that it regards such agreements as "hardcore cartel conduct" subject to criminal prosecution, no less than naked price-fixing or market-allocation conspiracies in product markets.

As emphasized by the Guidance, an agreement between employers to restrain competition in recruiting or compensating employees need not be express, much less written, in order to constitute a criminal antitrust conspiracy.  An understanding amounting to an antitrust conspiracy may instead be inferred from parallel conduct of the employers and related communications between them, directly or through an intermediary, such as a trade association or consultant, particularly if parallel conduct involved matching changes that could be disadvantageous unless each such employer followed suit.  Thus, the Guidance cautions companies "not to communicate" their recruiting or compensation policies to any "other companies competing to hire the same types of employees," irrespective of whether the companies are competitors in other respects.  Simply receiving such information from another company is deemed a "red flag" indicative of possible collusion.  As the Guidance points out, an agreement to share competitively sensitive information may itself constitute a civil antitrust violation, even absent any agreement to adopt common policies across companies.

A naked agreement between employers to restrain competition in recruiting or compensating employees, or providing benefits, is deemed a per se antitrust violation, subject to prosecution as a felony even without any market-wide anticompetitive effects, and regardless of any cost justification.  Thus, as indicated by the Guidance, it is no defense that only two among many alternative employers reached such agreement, or that a "no-poaching" agreement may prevent exploitation of a company's substantial investment in training employees, or that cost-savings from a "wage-fixing" agreement may enable charities to provide substantially more services.  Even an unaccepted invitation to join in any such agreement may itself violate the Federal Trade Commission Act.

The Guidance makes clear that these antitrust strictures, which are generally followed by state as well as federal antitrust enforcers, apply to non-profit entities, including educational institutions, no less than commercial enterprises.  The Guidance appears to recognize, however, a "no-poaching" or "wage-fixing" agreement between employers need not be viewed as a per se antitrust violation to the extent it is reasonably ancillary to merger or acquisition negotiations, or a legitimate joint venture between the employers, or enforcement of a valid non-compete clause of an employment contract.

In the event an organization may already be participating in conduct amounting to a criminal antitrust conspiracy, the Guidance notes that under published leniency policies of the Justice Department's Antitrust Division, the first qualifying entity or individual to report an antitrust offense and cooperate in its investigation will not be criminally charged for the reported offense.  If there is uncertainty whether contemplated conduct (e.g., a proposed joint venture) may violate antitrust law, the business review process of the Antitrust Division (and advisory opinion process of the FTC) is available to determine in advance how antitrust enforcement agencies may respond to such conduct.  In either event, consultation with antitrust counsel may be advisable.

Note: This Bulletin is not intended as legal advice. Readers should seek professional legal counseling before acting on the information it contains.

Related Attorneys

Media Contact

Marlene Laro
mlaro@potomaclaw.com
703.517.6449

Recent News

Jump to Page

By using this site, you agree to our updated Privacy Policy and our Terms of Use