Last month, the Federal Trade Commission and the Antitrust Division of the Department of Justice issued “Antitrust Guidance for Human Resource Professionals.” The guidelines are a helpful reminder that any agreement among competing employers to limit the employment or compensation of potential hires may violate federal antitrust laws.
“Competing employers” in this context means any companies which “compete to hire or retain employees . . . , regardless of whether the firms make the same products or compete to provide the same services.”
No-poach agreements are agreements between two or more companies not to hire each other’s employees. A softer version simply prevents employers from actively soliciting each other’s employees, but does not prohibit the actual hiring if the employee herself initiates the outreach.
According to their recent guidance, the FTC and DOJ view as illegal any agreement between employers to limit their competition for new employees. Thus, a no-poach agreement – even the softer, “non-solicit” version – is likely to be viewed by the government as an antitrust violation.
The FTC/DOJ guidance emphasizes that the federal government intends to aggressively pursue felony charges against companies and individuals it deems guilty of “naked” wage-fixing or no-poach agreements. “Naked” agreements are those agreements that are separate from or not reasonably necessary to a larger legitimate collaboration between the employers. Such agreements are per se illegal regardless of their anticompetitive effects. Legitimate joint ventures between employers, on the other hand, are illegal only to the extent they unreasonably restrain competition (e.g., their anticompetitive effects outweigh their procompetitive benefits).
The FTC/DOJ guidance also emphasizes that even “[s]haring information with competitors about terms and conditions of employment can also run afoul of the antitrust laws.” In the government’s view, “[e]ven if an individual does not agree explicitly to fix compensation or other terms of employment, exchanging competitively sensitive information could serve as evidence of an implicit illegal agreement.”
The guidance is directed to human resource professionals and others involved in hiring and compensation decisions. According to the government, those professionals “often are in the best position to ensure that their companies’ hiring practices comply with the antitrust laws. In particular, HR professionals can implement safeguards to prevent inappropriate discussions or agreements with other firms seeking to hire the same employees.”
By directing the guidance to individual HR professionals, the government also makes an implicit threat against those persons, emphasizing that “[v]iolations of the antitrust laws can have severe consequences,” and that “the DOJ could bring a criminal prosecution against individuals, the company, or both.”
In California, all of this is even more complicated because some no-poach agreements have been found to violate California’s Business and Professions Code.