Last week, the U.S. Department of Labor and Federal Trade Commission announced that they have entered into a memorandum of understanding for the purpose of sharing information and coordinating enforcement efforts. The agencies identified unfair competitive practices that could overlap with labor issues. By sharing information, an initial investigation by one agency could lead to administrative complaints or litigation from both based on the same circumstances.
For employers, this collaboration could result in multiple agency claims relating to their use of noncompetition agreements. The FTC has declared some noncompetes to be an anti-competitive practice and has proposed regulations that would limit their use nationwide. DOL has also expressed concerns over the use of noncompetes as a tool to depress wages, especially when used with lower-level employees. Another area of potential cooperation involves franchise agreements that limit one franchisee’s ability to recruit or hire another franchisee’s workers.
Employers faced with either a FTC or DOL investigation should consider whether the allegations involved in the matter could result in multi-agency prosecution. Their arguments and legal strategy used to respond to the initial federal inquiry should be structured with the potential for a second administrative investigation at some point in the future.