The U.S. Department of Justice’s (DOJ) Antitrust Division and the Federal Trade Commission (FTC) recently issued guidance for HR professionals on how to avoid running afoul of antitrust laws when making hiring and compensation decisions. 
Background
Antitrust laws are often enforced against individuals or entities that engage in actions that tend to reduce competition in connection with the sale of goods or services, but they also apply to competition among employers to hire employees. The DOJ and the FTC, which jointly enforce U.S. antitrust laws, recently issued “Antitrust Guidance for Human Resource Professionals” to highlight the potential antitrust violations that may arise in the context of hiring and compensation.
The DOJ and the FTC have taken enforcement actions against employers that have agreed not to compete against each other for employees. Depending on the facts of a given case, the DOJ may also pursue criminal prosecution against individual decision makers, a company, or both. In addition, if an illegal agreement not to compete for employees causes injury to an employee or another private party, he can bring a civil lawsuit for treble damages (i.e., three times his actual damages).
Wage-fixing and no-poaching agreements
Antitrust laws prohibit “wage-fixing” agreements between competing employers. A wage-fixing agreement is an agreement between employers that constrains decision making with regard to wages, salaries, benefits, or other terms of employment. Competing employers may not enter into agreements regarding employee salaries, either at a specific level or within a range.
In this context, employers are deemed to be competitors in the employment marketplace if they seek to hire the same employees, regardless of whether they make the same products or provide the same services. It’s unlawful for competitors to agree not to compete with each other, including in the market for employees, even if they are motivated by a desire to reduce costs.
Antitrust laws also prohibit “no-poaching” agreements between competing employers. A no-poaching agreement is an agreement between competing employers not to solicit or hire each another’s employees.
It doesn’t matter if a wage-fixing or no-poaching agreement is formal or informal, written or oral. Even without an explicit agreement, other circumstances—such as evidence of discussions between competing employers and parallel behavior—may create an inference of an illegal agreement. Further, merely inviting a competitor to enter into a no-poaching agreement or a wage-fixing agreement—referred to as an “invitation to collude”—may be an antitrust violation, even if the invitation doesn’t result in an agreement.
Information sharing
Even in the absence of an explicit wage-fixing or no-poaching agreement, sharing information with competitors about the terms and conditions of employment may violate antitrust laws because it may be evidence of an implicit illegal agreement. In an industry with few employers, periodic exchanges of current wage information among competitors could establish an antitrust violation if the exchanges decrease—or are likely to decrease—employee compensation. Agreements to share information among competitors are not prosecuted criminally, but they may be subject to civil liability when they have anticompetitive effects.
The DOJ/FTC guidance advises employers not to communicate their policies on hiring, soliciting, or recruiting employees to other employers that are competing to hire the same types of employees and not to ask other employers to communicate their policies to them. However, the guidance states that an exchange of information 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 source.
Enforcement
The guidance provides several examples of the DOJ’s and the FTC’s successful enforcement of antitrust laws in the employment context. For example:
- The DOJ brought a case against competing hospitals that had agreed to a uniform schedule of the rates that they would pay for temporary and per diem nurses.
- The FTC brought a case against fashion designers for attempting to reduce the fees and other compensation for models.
- The DOJ brought three cases against technology companies that had entered into no-poaching agreements with competitors.
- The FTC brought a case against a company that had entered into agreements to boycott temporary nurses’ registries in order to eliminate the competition for nursing services among nursing homes.
- The DOJ brought a case against a society of hospital HR professionals for conspiring to exchange nonpublic prospective and current wage information on registered nurses, which caused competing hospitals to match one another’s wages, keeping nurses’ pay artificially low.
All of those cases resulted in consent judgments against the employers.
Red flags
In addition to the guidance, the DOJ and FTC have published the following nonexhaustive list of “red flags” that may raise antitrust concerns in the hiring or employment context:
- Agreeing with another company about employee salaries, benefits, or other terms of compensation or employment;
- Agreeing with another company to refuse to solicit or hire its employees;
- Expressing to competitors that they should not compete too aggressively for employees;
- Exchanging company-specific information about employee compensation or terms of employment with another employer;
- Participating in a meeting, such as a trade association meeting, where such topics are discussed;
- Discussing benefits or compensation with colleagues at other companies, including during social events or other nonprofessional settings; and
- Receiving documents that contain another company’s internal data on employee compensation.
Bottom line
In light of the DOJ’s and the FTC’s emphasis on antitrust enforcement in the employment context, employers should ensure that employees who participate in hiring and compensation decisions are trained on the prohibitions under the antitrust laws and the red flags to be avoided. You should also ensure that employees with access to compensation data or other sensitive information are trained on the risks of sharing such information with competitors. 
Finally, establish, and make all employees aware of, methods for reporting conduct that may violate antitrust laws, so that you can address potential violations as quickly as possible.
Howard Fetner is an attorney with Day Pitney LLP, practicing in the firm’s New Haven, Connecticut, office. He may be contacted at hfetner@daypitney.com.