The pandemic has resulted in worker layoffs, furloughs, and terminations erasing nearly overnight the nation’s record low unemployment and ballooning the number of unemployment claims this last week to over 4.4 million.[1] At the same time, Congress has responded with myriad laws designed to incentivize companies to keep workers on the payroll, while in some cases permitting reduced compensation or hours worked.[2] Appreciating this tremendous upheaval in the labor market, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) jointly announced last week that they will be vigilant regarding employers, staffing companies and recruiters that participate in anti-competitive activities such as agreeing to reduce compensation, benefits and hours worked during the COVID-19 pandemic.[3] Their joint statement reminds employers, even in a time of increasing collaboration between federal, state and local governments and private businesses, that no pandemic exceptions apply for anti-competitive conduct that crosses the line and violates antitrust laws. The joint statement also serves as a reminder to employees, whether deemed essential or not, that they may email complaints to the agencies concerning perceived anti-competitive conduct in labor markets.[4]

Businesses should avoid discussions with competitors concerning agreements not to poach or recruit employees, wages or wage ranges, benefits, hours worked, labor costs, and other terms and conditions of compensation. Companies should strive to avoid the implication that prohibited matters are being discussed with competitors. Without care, a well-intentioned invitation to collaborate or share information relating to efforts to maintain business operations or employees during the crisis, to conduct a wage survey, to set appropriate salary ranges, or to conduct joint product efforts or research could result in a regulatory investigation. The familiar employer and human resources maxim “no good deed goes unpunished” applies with full force to the “invitation to collude” antitrust law framework, which may be applied to communications perceived as crossing the line to collusion by a competitor or worker who is on high alert and will notify the authorities.

The pandemic has encouraged businesses to collaborate and share information relating to employment and the workplace, which makes prioritizing compliance all the more important. There is a strong desire – and in many cases a need – to share information in an effort to collaborate to sustain the health of the businesses and the economy. In an environment where resources and the tolerance for litigation have decreased, there may be an increased business reason to negotiate a “cease fire,” for example, as it relates to the enforcement of noncompetition agreements. As a starting point for balancing compliance requirements, the DOJ’s “Antitrust Guidance for Human Resource Professionals” is a good resource. As explained in this Alert, any and all “no-poaching” and “wage-fixing” agreements, express or implied, should be avoided. A no-poaching agreement occurs when one business agrees with another business to not hire or recruit the other business’s employees. Similarly, a wage-fixing agreement occurs when one business agrees with another business regarding employee salaries or other terms of compensation. Discussions concerning these topics could imply that there was an invitation to collude or that an implied agreement was somehow reached.

The DOJ and the FTC have put businesses on notice “who use COVID-19 to harm competition that cheats payroll and non-payroll workers,” including “doctors, nurses, first responders, and those who work in grocery stores, pharmacies, delivery and distribution networks, and warehouses, among other essential service providers on the front lines of addressing the crisis.” The agencies’ joint statement specifically mentions medical travel and locum agencies. Businesses and organizations of all kinds should construe the agencies’ joint statement as a warning shot. The agencies caution that COVID-19 does not provide leniency for businesses to engage in anti-competitive conduct that lowers wages or reduces hours for the nation’s essential workers. This follows the agencies’ March 24, 2020 announcement that they would expedite antitrust review for businesses that seek to collaborate during the pandemic.[5] The message here is clear: Employers must continue to strictly follow antitrust laws during this pandemic and remain vigilant. If collaboration touching on employment and labor issues is important to you, it is prudent to seek counsel to determine whether an expedited agency review is warranted.

What may be intended as mutually beneficial cooperation with a competitor in times of emergency may actually be deemed an antitrust violation or an attempt to unlawfully disadvantage a worker in a time of pandemic. The potential consequences include civil enforcement actions and criminal prosecution by the DOJ’s Antitrust Division. By way of example, the DOJ filed a civil enforcement action against a hospital and healthcare association for acting on behalf of hospitals to set uniform bill rate schedules the hospitals would pay for temporary and per diem nurses. The DOJ has also filed three civil enforcement actions against well-known technology companies that had entered into “no-poach” agreements with competitors to limit hiring. The FTC has also brought cases concerning agreements to boycott in order to eliminate competition in the healthcare industry and the fashion industry.[6] Federal investigations may also invite private class actions.

While it is important to remember that businesses should avoid discussions with competitors that cross the line, agreements between competitors regarding labor and employment issues that are reasonably necessary to achieving the goals of a legitimate collaboration, joint ventures, and appropriate information sharing (COVID-19 related or otherwise) may be lawful. Businesses should nonetheless use great caution and utilize safeguards before employing such agreements, and should seek attorney guidance in doing so. In addition to wage-fixing and no-poaching agreements between competitors, the DOJ and FTC have challenged unlawful noncompete agreements and the anti-competitive exchange of sensitive information such as salaries, wages, benefits and other compensation data. The enforcement of restrictive covenant/noncompete agreements in this context involves the interplay between federal antitrust standards and specific state standards pertaining to noncompete agreements.[7] It is important to keep in mind state laws, as some states categorically decline to enforce noncompete agreements against workers who are laid off or with lower incomes, or require paying the laid-off worker during the post-employment restriction period in order to enforce the noncompete.[8] Indeed, the myriad state law differences in the noncompete area require close scrutiny by the prudent employer considering competition and antitrust risks.

The bottom line is to be vigilant when interacting with your competitors to your workers’ perceived disadvantage, even when good business reasons exist to interact. Even though the COVID-19 pandemic has created situations for increased collaboration, care must be exercised to keep prohibited topics off limits. Businesses should consider:

Training managers to know the proper limits for communicating with competitors, and implementing preapproved agendas prior to such interactions.

Training on proper protocols for safeguarding sensitive information and maintaining employee and data privacy in this context.

Determining whether an expedited agency review of anticipated activities is prudent and evaluating the antitrust risk your business faces as it relates to employment and labor matters.

[1] Bureau of Labor Statistics, The Employment Situation-March 2020 (April 2020), https://www.bls.gov/news.release/pdf/empsit.pdf.
[2] Coronavirus Aid, Relief, and Economic Security Act (March 2020), https://www.congress.gov/bill/116th-congress/senate-bill/3548/text; Families First Coronavirus Response Act (March 2020), https://www.congress.gov/bill/116th-congress/house-bill/6201/text.
[3] Justice Department and Federal Trade Commission Jointly Issue Statement on COVID-19 and Competition in U.S. Labor Markets (April 2020), https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-jointly-issue-statement-covid-19-and (“The Antitrust Division will not tolerate companies and individuals who use COVID-19 to harm competition that cheats payroll and non-payroll workers … this includes doctors, nurses, first responders, and those who work in grocery stores, pharmacies, delivery and distribution networks, and warehouses, among other essential service providers on the front lines of addressing the crisis. Even in times of crisis, we choose a policy of competition over collusion.”).
[4] This reminder comes on the heels of press releases by the agencies asking citizens and businesses to report complaints of price gouging and hoarding. Justice Department and Federal Trade Commission Jointly Issue Statement on COVID-19 and Competition in U.S. Labor Markets (April 2020). The joint statement also cautions those selling products to government agencies that the DOJ Procurement Collusion Strike Force is on high alert for collusive practices in the sale of COVID-19-related products.
[5] Joint Antitrust Statement Regarding Covid-19 (March 2020), https://www.justice.gov/atr/joint-antitrust-statement-regarding-covid-19.
[6] For a recent private party case involving anti-competition, joint ventures, collaboration and group boycott issues in the healthcare context, see, e.g., Medical Center Elizabeth Place v. Atrium Health, 922 F.3d 713 (6th Cir. 2019).
[7] See, e.g., Innovation Ventures LLC v. Custom Nutrition Labs, LLC et. al, 4:12-CV-13850, 2020 WL 1531700 (E.D. Mich. March 31, 2020).
[8] See Massachusetts, Washington, New Hampshire, Maryland, Maine and Rhode Island law. Massachusetts Noncompetition Agreement Act, https://www.mass.gov/info-details/mass-general-laws-c149-ss-24l; RCW 49.62.02, https://app.leg.wa.gov/RCW/default.aspx?cite=49.62.020; An Act Relative to Noncompete Agreements for Low-Wage Employees, http://gencourt.state.nh.us/bill_status/billText.aspx?sy=2019&id=466&txtFormat=html; Noncompete and Conflict of Interest Clauses Act, http://mgaleg.maryland.gov/mgawebsite/legislation/details/sb0328?ys=2019rs; An Act To Promote Keeping Workers in Maine, http://legislature.maine.gov/legis/bills/getPDF.asp?paper=HP0538&item=1&snum=129; Rhode Island Noncompetition Agreement Act, http://webserver.rilin.state.ri.us/BillText19/HouseText19/H6019.pdf.