The U.S. Department of Justice’s Antitrust Division and the Federal Trade Commission jointly issued their Antitrust Guidance for Human Resources Professionals on October 20, 2016. The guidance addresses the applicability of antitrust law to employee hiring and compensation, highlighting the potential illegality of agreements among employers regarding competition for and the terms of employment offered to their employees. 

The guidance breaks ground in two key ways:

• It is directed specifically to front-line human resources professionals who are engaging in recruiting efforts on a day-to-day basis—which is a departure from earlier enforcement efforts directed at high-level decision makers. 
• It announces that the DOJ will begin criminally investigating and prosecuting certain anticompetitive agreements in this area—a significant shift in government policy, which until now has been limited to civil enforcement actions. 

The issuance of the guidance thus provides an important reminder to employers to review their human resources policies and practices to ensure that they do not run afoul of the antitrust laws.

Employment-Related Agreements and Communications Between Employers  

Based on lessons from several recent civil enforcement actions against employers that have agreed not to compete for employees in one form or another, the guidance provides “general principles” regarding the legality of agreements and communications among employers in the realm of employee hiring and compensation. The guidance states that an individual “likely is breaking the antitrust laws” if he or she agrees with individuals at another company about employee salary or other terms of compensation, either at specific level or within a range (“wage-fixing” agreements), or to refuse to solicit or hire that other company’s employees (“no poaching” agreements). The guidance reaffirms longstanding antitrust jurisprudence that such agreements need not be explicit and may be inferred from evidence of discussions or parallel behavior involving the companies at issue. The guidance further provides that if an agreement is separate from or not reasonably necessary to a larger legitimate collaboration between the companies, it is per se illegal under the antitrust laws. Going forward, the DOJ “intends to proceed criminally” against such naked wage-fixing or no-poaching agreements, including by bringing “criminal, felony charges against the culpable participants in the agreement, including both individuals and companies.”

The guidance also cautions against agreements among employers to exchange competitively sensitive information about the terms and conditions of employment. According to the guidance, such agreements to share information are not per se illegal and therefore will not be prosecuted criminally, but may nevertheless be subject to civil antitrust liability when they have, or are likely to have, an anticompetitive effect. The guidance notes that not all information exchanges are illegal and that exchanges may be lawful if a neutral third party manages the exchange; the exchange involves information that is relatively old; the information is aggregated to protect the identity of the underlying sources; and enough sources are aggregated to prevent competitors from linking particular data to an individual or source.    

Next, the guidance provides answers to several hypothetical questions from human resources professionals regarding the legality of specific conduct. The Q&A section suggests that several types of agreements may be illegal, including the following:

• An explicit agreement between HR professionals to not recruit or hire each other’s employees;
• An agreement among managers to establish a more reasonable pay scale for employees (the guidance notes that a mere invitation to a competitor may be illegal even if it does not result in an agreement to fix wages);
• An agreement among nonprofit organizations to cap wage growth rates in order to keep costs down so that the nonprofits can serve more people (the guidance notes that a desire to cut costs is no defense, and merely employing a third-party intermediary to set the pay scale does not insulate individuals or organizations from liability);
• A “gentleman’s agreement” between universities to not try to recruit each other’s senior faculty (the guidance reiterates that an agreement need not be in writing to be illegal); and
• An agreement between small businesses in an industry to stop offering gym memberships as a benefit of employment (the guidance notes that the prohibition on wage fixing applies to job benefits such as gym memberships, parking and meals).

The guidance also notes that companies may consider seeking guidance from the DOJ or FTC about the legality of contemplated future conduct. Companies may also report potentially illegal conduct to either agency, including via the DOJ’s Corporate Leniency Policy, which provides that the first qualifying corporation to report an antitrust offense and cooperate with the Antitrust Division’s investigation will not be criminally charged for the reported antitrust offense.         

In connection with the guidance, the DOJ and FTC issued a list of antitrust “red flags” that managers or human resources professionals and others should look out for in employment settings. The list suggests that these professionals should be aware of antitrust concerns that may arise based on agreements with another company about: employee salary or other terms of compensation; refusals to solicit or hire the other company’s employees; employee benefits; or other terms of employment. The list also identifies as a red flag exchanges of company-specific information about employee compensation or terms of employment. The list cautions against discussing any of these topics with competitors, including at trade association meetings or social events.   

Implications of the DOJ & FTC Guidance

Coming on the heels of several high-profile civil enforcement actions related to employee hiring and compensation, the DOJ and FTC’s issuance of specific guidance in this area suggests that the federal competition authorities plan to increase their pursuit of such claims. The guidance is notable in several other respects:

• Unlike similar directives and most government enforcement actions, the guidance focuses on front-line human resources professionals rather than high-level decision makers. The guidance makes clear the need to provide training to human resources professionals regarding the applicability of the antitrust laws to hiring and compensation issues.
• Although the guidance is addressed to human resources professionals, its directives apply to all employees that are in a position to have discussions with competitors regarding employee hiring and compensation. As such, companies should review their antitrust policies and trainings with respect to all employees to ensure there is a sufficient explanation of the scope of potentially improper competitor agreements.
• In announcing the DOJ’s stated intent to begin criminally prosecuting naked wage-fixing and no-poaching agreements—a significant shift in government policy—the guidance confirms that employees and the company itself may be found criminally liable for such conduct, including potential jail time for individuals involved.  As such, the guidance serves as a stark reminder of the importance of ensuring compliance in this area. 
• Although the guidance indicates that the government will not pursue criminal prosecution of non-per se violations of the antitrust laws, it confirms that lesser conduct—such as certain agreements to share information with competitors—may nevertheless give rise to civil liability. Any such information sharing policies or practices should be closely reviewed to ensure compliance with the antitrust laws. 
• The inclusion of a warning about the potential illegality of mere invitations to collude may provide another indication that the federal competition authorities are continuing to heighten their focus on conduct that may not itself result in anticompetitive agreements, including unilateral invitations.      
• Finally, the guidance notes the potential antitrust implications of sharing hiring and compensation information during discussions about potential mergers or acquisitions, joint ventures or other collaborative activities with competitors. Parties to such activities should be sure to take appropriate safeguards to ensure compliance with the antitrust laws.    

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