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New Government Guidance: HR Agreements May Violate Antitrust Laws

On October 20, 2016, the Department of Justice’s Antitrust Division, together with the Federal Trade Commission, released their Antitrust Guidance for Human Resource Professionals. The Guidance stresses that it is unlawful for competing employers to enter wage-fixing agreements, or to agree not to hire each other’s employees, and that individuals who do so, as well as their companies, may be held liable under federal antitrust laws.

The Guidance addresses two issues: anti-poaching agreements and wage fixing between competitors. “Competitors” in this context are employers who compete for the same employees, regardless of whether they compete in the marketplace with respect to the goods and services they provide. Agreements between competitors not to hire each other’s employees violate antitrust laws. In addition, the Guidance cautions that companies also should not communicate their hiring and recruitment policies to other companies.

The Guidance notes that violations of the antitrust laws can have dire consequences. The Department of Justice can bring criminal prosecutions against both companies and any involved individuals. Both the Department of Justice and the Federal Trade Commission can bring civil enforcement actions. Aggrieved private parties can bring civil actions that can result in treble damages.

Even if employers do not officially agree to fix wages or agree not to hire each other’s employees, other evidence, such as oral discussions and parallel behavior, could lead to an inference of wrongful action. The Guidance further cautions that sharing sensitive information with competitors about the terms and conditions of employment can violate civil antitrust laws, if this action has an anticompetitive effect. It suggests avoiding any discussion with competitors about employee compensation, compensation policies, or particular compensation levels.

The Guidance further cautions that these actions cannot be made lawful by using a third-party intermediary. However, third parties can manage information exchanges if they are specifically designed not to violate antitrust laws. The Guidance states that an information exchange may be lawful if: (1) a neutral third party manages it; (2) the information gathered is “relatively old;” (3) the information is aggregated to protect the identity of the sources; and (4) there are enough sources to prevent competitors from being able to link particular information to its source.

The Guidance provides several situations illustrating potential antitrust violations. For example, the Guidance states that reaching out to other competing companies to try to establish a more reasonable pay scale for industry employees would violate antitrust laws. Inviting a competitor to enter an illegal agreement – even if no agreement is reached – also could be unlawful. The Guidance notes that non-profit organizations competing for the same employees are subject to the same antitrust restrictions as for-profit companies. The Guidance also notes that trying to persuade competitors to limit benefits has the same antitrust ramifications as trying to limit wages.

The Guidance sets forth avenues for reporting violations, and notes that the Department of Justice’s Antitrust Division has a leniency program. Under the leniency program, companies and individuals may avoid criminal penalties if they are the first to confess participation in a criminal antitrust violation, they fully cooperate with the Division, and they meet other specified conditions. You should consult counsel if you are contemplating such action.

What Does This Mean For You? This Guidance signals that the Department of Justice and the Federal Trade Commission will be taking these issues very seriously, and will be investigating and prosecuting companies and individuals, including human resources professionals, who are involved in such arrangements. Accordingly, employers should not enter these kinds of arrangements, and should avoid discussion with competitors that could lead to any such arrangement.

If you have any questions about this or any other employment or labor law issue, please contact Whitney Rahman at (717) 509-7237 or swr@blakingerthomas.com.

**This update is provided for informational purposes only and
should not be construed as legal advice or as creating an
attorney-client relationship where one does not already exist**