DOJ and FTC issue antitrust guidance for HR professionals—and threaten criminal prosecution

October 27, 2016

Antitrust Alert

Author(s): Laura B. Bacon, Lisa C. Sullivan

Last week, the DOJ’s Antitrust Division and the FTC jointly released guidance for human resource professionals to assist in understanding how the antitrust laws apply to hiring and compensation decisions. In addition to the guidance, the agencies also released a shorter document, capable of being printed to a 4"x6" index card, of “Antitrust Red Flags for Employment Practices” for HR professionals to use on a day-to-day basis.

The DOJ and the FTC claim that the guidance will enable HR professionals to “implement safeguards to prevent inappropriate discussions or agreements” that may violate antitrust laws. Recognizing that oftentimes the offending actions may take place at an executive level, the guidance is intended to arm HR professionals with the information they need to spot illegal activity at the implementation stage: “HR professionals often are in the best position to ensure that their companies’ hiring practices comply with the antitrust laws.” Since violations of antitrust laws can result in civil and even criminal liability, HR professionals may be able to spare their employers from costly mistakes.

The agencies provide examples of employment decisions that may violate the antitrust laws. For example, agreements among competitors not to recruit certain employees (often called “no poaching” agreements) or to set wages are likely per se illegal antitrust violations, the agencies say. Not only the federal agencies, but also plaintiffs’ attorneys bringing class action lawsuits, have challenged these types of no poaching agreements. Just this month, DreamWorks agreed to contribute $50 million to settle allegations that it agreed with competitors to keep salaries for animators low.

It also may be unlawful to exchange company-specific information about employee compensation or benefits with another company. This is not to say that employers trying to remain competitive in a certain industry by offering the same or similar compensation and benefits packages to prospective employees are breaking the law. But, unless the exchange of information is carefully structured, employers may face the risk of potential antitrust liability.

Finally, the most important aspect of the agencies’ guidance is the DOJ’s announcement that it now may prosecute criminally “naked wage-fixing or no-poaching agreements that are unrelated or unnecessary to a larger legitimate collaboration between the employers.”

The guidance is available here. The “Red Flags” card is available here.

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