The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) (collectively the "Agencies") have issued new Antitrust Guidance for Human Resource Professionals. The new Guidance is designed to "alert human resource (HR) professionals and others involved in hiring and compensation decisions to potential violations of the antitrust laws." The Agencies state that they will bring enforcement actions against employers who have agreements with other employers to limit or fix wages or other terms of employment, or to improperly exchange wage and other competitively sensitive employment information. Most significantly, the DOJ for the first time warns that it will criminally prosecute "naked" wage-fixing and "no poaching" agreements.

New Criminal Focus on Wage-Fixing and "No Poaching" Agreements

Agreements among employers regarding employee compensation or agreements not to solicit or hire each other's employees have been the focus a several recent civil enforcement actions arising in the technology industry. When such agreements are "naked" (i.e., agreements that are separate from or not reasonably related to a broader legitimate collaboration, such as a joint venture), they are considered per se unlawful under the antitrust laws. While the Agencies have pursued civil actions against such practices in the past, "[g]oing forward, the DOJ intends to proceed criminally against naked wage-fixing or 'no poaching' agreements."

In adopting this new criminal focus with respect to naked restraints, the Agencies expressly state that the per se rule does not apply to employment-related restraints that are ancillary to otherwise pro-competitive competitor collaborations, such as joint ventures. While such ancillary restraints remain subject to the more lenient "rule of reason" standard, the new Guidance places a greater premium on careful drafting of those restraints to ensure that they are narrowly tailored to the purpose of the collaboration and are not overly broad.

Guidance on the Exchange of Compensation Information

The recent Guidance also cautions against the sharing among employers of information relating to compensation, benefits and other terms of employment.  While the Agencies make clear that "agreements to share [such] information are not per se illegal and, therefore, not prosecuted criminally" they can lead to civil antitrust liability when such agreements have or are likely to have an anticompetitive effect.  Of particular concern is the exchange among employers of current, company-specific wage and other compensation information.

Noting that not all information exchanges are illegal, the Guidance recognizes that, "it is possible to design and carry out information exchanges in ways that conform with the antitrust laws." Parties to a merger or other collaboration for which there is a legitimate need to exchange employment information can adopt the following types of precautions:

  • hiring a neutral third-party to manage the exchange of non-public, company-specific information;
  • aggregating information such that recipients cannot identify the particular source;
  • aggregating sources to prevent competitors from linking particular data on compensation or benefits to an individual employer, or
  • limiting exchange to information that is relatively old.

Finally, the Guidance takes an expansive view of the market for labor in which firms can "compete to hire or retain employees . . . regardless of whether the firms make the same products or compete to provide the same services." Accordingly, HR professionals and other company personnel should avoid discussions regarding wages and employee benefits with any third-parties, even those that are not in the same industry or traditionally viewed as competitors. Examples of such prohibited discussions are set forth in the Agencies' "Antitrust Red Flags for Employment Practices" issued in connection with the Guidance.

Companies should consider incorporating the new Guidance and the Red Flags into their antitrust training and compliance programs.

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