Recent developments serve as a reminder for employers and HR professionals to be aware of the antitrust laws when dealing with certain employment issues.
Background
In July 2021, President Joe Biden issued Executive Order (EO) 14036, which affirmed the executive branch’s policy to enforce the antitrust laws. Two aspects of the EO relate directly to employment law:
- The direction that the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) should consider revisions to the Antitrust Guidance for Human Resource Professionals issued in October 2016; and
- The suggestion that the FTC should consider rulemaking to curtail the unfair use of noncompete clauses.
Although neither event has occurred yet, they are on the horizon and should serve as a reminder for employers and HR pros to be aware of the antitrust laws or face civil or criminal consequences.
No-Poaching Agreements = Restraint of Trade
Under current DOJ and FTC guidelines, agreements among competing employers to avoid recruiting one another’s employees are illegal. While the government has taken civil action against no-poaching agreements in the past, we’ve seen recent criminal indictments, too. The DOJ considers the agreements between competitors to be a restraint of trade, and it’s beginning to use the threat of criminal penalties to curtail them.
It’s unclear whether courts will apply (1) a strict rule of per se illegality or (2) a rule of reason. The decision likely will depend on the nature of the relationship between the parties to the agreement. For example, agreements between a franchisor and a franchisee may be subject to the less stringent rule of reason. But regardless of the standard applied, the possibility of criminal sanctions is daunting.
Wage Suppression
The DOJ also has taken criminal action against employers alleged to have colluded with competitors to suppress wages. In November 2021, a Texas court allowed a criminal indictment to proceed when the employers were alleged to have acted in concert to suppress pay. The businesses argued their due process rights were violated because criminal law hadn’t been previously applied to such activity. The court rejected the argument while expressing some sympathy to the employers for being among the first to face such a charge.
Although naked agreements not to compete with respect to wages or set wages for specific jobs are prohibited, sharing information with competitors may be allowed in some instances if the data are:
- Collected by a neutral third party;
- Old (i.e., not current); and
- Made available to others in an aggregated form and if there are enough participants that the information provided can’t be linked to a specific participant.
For example, trade associations may be able to properly assemble or provide the information.
Bottom Line
It’s important for executives and HR pros to be aware of the DOJ’s emerging strategy to use the antitrust laws, not only civil but criminal as well, to root out collusion in labor markets. Consult with an employment lawyer if you have any questions about proposed actions in connection with competitors.
Deborah M. Tharnish is of counsel with Dentons Davis Brown in Des Moines, Iowa. You can reach her at deborah.tharnish@dentons.com.