On October 20, 2016, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued “Antitrust Guidance for Human Resources (HR) Professionals.” The jointly prepared guidance—directed at HR executives—reiterates the antitrust agencies' position that wage-fixing and "no-poaching" agreements are per se antitrust violations, and puts HR executives and their companies on notice that entering into such agreements could subject them to criminal prosecution.

The guidance stems from a series of civil enforcement actions by the DOJ and the FTC regarding industry agreements that were found to suppress wages and competition for employees. While these actions so far have been resolved by civil consent judgments,¹ the antitrust agencies have stressed in this guidance that they will consider referring the matters to the DOJ to pursue as criminal prosecutions. Furthermore, agreements that are not prosecuted criminally may still be subject to civil enforcement by the DOJ and the FTC.

The guidance is directed primarily to HR professionals given that many of these agreements involve such professionals, and given that they tend to be in the best position to ensure compliance. The antitrust agencies now expect companies to expand antitrust training and compliance programs to their HR departments. In doing so, HR personnel should be informed that they can be subject to criminal prosecution individually for their involvement in anticompetitive hiring practices.

What Type of Conduct Is Concerned?

The guidance describes two types of potentially unlawful activity: (i) agreements between competitors that may constrain individual firm decision-making regarding hiring and compensation; and (ii) the exchange of confidential, competitively sensitive employment information. (The guidance contains a useful Q&A section that identifies several everyday scenarios that may give rise to antitrust concerns.)

Agreements Between Competitors. The guidance makes clear that “firms that compete to hire or retain employees are competitors in the employment marketplace, regardless of whether the firms make the same products or compete to provide the same services.” Further, as with any antitrust conspiracy, an “agreement” need not be formal for it to be subject to antitrust enforcement. An agreement can be an informal understanding to achieve an unlawful purpose or can be inferred from circumstantial evidence suggesting an improper common commitment.

The guidance highlights two types of agreements that infringe the antitrust laws: (i) agreements about employee salary or other terms of compensation (so-called “wage-fixing”); and (ii) agreements concerning the refusal to solicit or hire any other company’s employees (known as “no-poaching” agreements).

The antitrust agencies consider wage-fixing and no-poaching agreements to be per se antitrust violations. As such, the guidance puts companies and their HR executives on notice that the DOJ will prosecute such agreements criminally. Furthermore, as a per se violation, it is not necessary for the DOJ to prove the agreement had an actual adverse market impact. Thus, even smaller companies that lack the ability when acting in concert to impact the market and their employees could be subject to prosecution for participating in such agreements.

Exchange of Competitively Sensitive Employment Information. The guidance also points out that exchanging competitively sensitive employment information may give rise to an antitrust violation. The antitrust agencies liken the exchange of this employment information to the exchange of pricing information, which has the potential to adversely impact competition in markets for goods and services. The guidance notes that the antitrust risks associated with information exchanges can be mitigated by ensuring that only historical, aggregated information is exchanged, with safeguards that the information will not be used to limit competition.

Information-sharing agreements are typically not subject to the per se rule. Thus, they would be unlawful only if they cause an anticompetitive effect in the relevant employment market. For example, the DOJ sued a society of HR healthcare professionals for conspiring to exchange information about the current wages of registered nurses, which resulted in artificially low salaries for nurses. On the other hand, the guidance acknowledges that there are numerous circumstances where the exchange of competitively sensitive employment information would be justified. For example, the guidance is not meant to suggest that a new enforcement policy will apply to legitimate, carefully structured due diligence efforts in M&A transactions.

What Is New?

• The antitrust agencies are now particularly focused on HR departments and personnel (and not just sales and other commercial operations) for antitrust enforcement, including criminal prosecution.
• The antitrust agencies expect companies to include their HR departments in antitrust training and compliance efforts.
• The antitrust agencies recognize, however, that certain traditional employment practices, such as M&A due diligence and non-compete agreements between employer and employee, are not likely to result in per se violations (i.e., are not likely to be subject to criminal prosecution).
• The antitrust agencies have prepared a “quick reference card” that identifies red flags in a convenient format, available here: https://www.justice.gov/atr/file/903506/download.