Companies must take care to keep hiring policies confidential when competing to hire the same types of employees

On October 20, 2016, the U.S. Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission (FTC) jointly issued Antitrust Guidance for Human Resource Professionals and others involved in hiring and compensation decisions concerning the possible antitrust ramifications of their actions.

By way of background, the antitrust laws establish the rules of a competitive employment marketplace and Section 1 of the Sherman Act prohibits any “contract, combination or conspiracy in restraint of trade”. The DOJ and FTC are authorized to enforce this prohibition through civil and criminal penalties, as well as injunctive relief.  In civil actions, the amount of damages proven are multiplied by three and a successful plaintiff may recover all of its reasonable attorney’s fees.

The focus of the Guidance is agreements that restrain individual firm decision-making with regards to wages, salaries and other benefits, terms of employment and even job opportunities in the first instance.  It warns HR professionals to “implement safeguards” to prevent inappropriate discussions or agreements with other companies seeking to hire the same class of employees.  The agencies note that, “from an antitrust perspective, firms that compete to hire or retain employees are competitors in the employment market place, regardless of whether the firms make the same products or compete to provide the same services.”

To constitute a “contract, combination or conspiracy”, an agreement between two or more entities is required.  Therefore, a company acting wholly unilaterally can typically make decisions regarding hiring, soliciting or recruiting employees free of antitrust risk.  However, great care should be taken not to communicate the company’s policies to other companies competing to hire the same types of employees and not to ask another company to go along with hiring and similar restrictions.

Agreements among employers not to recruit certain employees or not to compete on terms of compensation are “per se illegal”. 

“Per se illegal” means that the defendant is not permitted to offer evidence that the conduct might be pro-competitive and it is the only area where the DOJ will seek criminal penalties.  It is irrelevant whether any agreement is formal or informal, written, spoken or unspoken.  The Guidance warns that, even if an individual does not actually agree orally or in writing to such actions, evidence such as discussions, followed by parallel behavior, may lead to an inference of an agreement.  In fact, at least one court has held that a “knowing wink” can be sufficient to establish an agreement.

Particularly sensitive are any discussions or information sharing about employee salaries or other terms of compensation, either at specific levels or within specific ranges (“wage fixing” agreements) and agreements to refuse to solicit or hire another company’s employees, often in return for a reciprocal agreement (“no-poaching” agreements).  The Guidance notes, however, that in certain situations, as for example joint ventures and appropriate shared use of facilities, such agreements may be reasonable and necessary to effectuate a larger legitimate collaboration and therefore may not be considered per se illegal.

Avoid sharing sensitive employment information with other businesses, even if they are not competitors.  

The Guidance warns that, even if participants in an agreement are parties to a proposed merger or acquisition, or are involved in a joint venture or collaborative activity, there is still antitrust risk if they share information about terms and conditions of employment.  However, it is possible to design information exchanges in ways that conform with the antitrust laws, as for example through a neutral third party, exchanges involving relatively old information, and using aggregated information to protect the identity of the underlying sources where there are enough sources to prevent competitors from linking particular data to an individual source.

Guidance Q & A’s.

The Guidance presents “Q & A’s” which address relatively common situations, including scenarios where managers from competing firms discuss entering into no-poaching agreements or, in light of perceived excessive “wage-growth”, reach out to other industry leaders to establish “reasonable pay scales.”  Non-profit organizations are held to the same standard as for-profit entities.  Similarly, “gentlemen’s agreements” among educational institutions are prohibited if they restrict recruitment of each other’s faculty.  The issues discussed and agreed to can be as minor as offering free gym memberships to employees if there is evidence that an agreement among the firms is the cause. The agencies also point out that professional societies and trade associations are particularly fertile grounds for informal “agreements” to arise and that great care should be exercised in attending professional conferences and similar gatherings of professionals.

At bottom line, the Guidance concludes with “when in doubt, seek legal assistance”.  Woods Rogers provides a full range of antitrust services including counseling and training.  If we can provide further information or answer any questions in these sensitive areas, please don’t hesitate to call.