DOJ Toughens Stance on Certain Employment-Related Agreements Between Competitors
New Antitrust Guidance Threatens Criminal Sanctions for No-Poaching, Non-Solicitation Deals
- The Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) have jointly released Antitrust Guidance for Human Resource Professionals, cautioning employers about potential serious antitrust consequences if they enter certain employment-related agreements with competitors.
- In the past, the DOJ and FTC have pursued antitrust enforcement actions only civilly – seeking injunctions to end the illegal agreements. In the new Antitrust Guidance, the DOJ commits to investigate no-poaching or non-solicitation agreements (as well as wage-fixing agreements) as possible criminal violations.
- Companies should be aware of this new antitrust guidance and take steps to ensure that any employment-related provisions in agreements with other companies are reasonably necessary to achieving the purposes of the agreements and narrowly tailored to protect legitimate business interests.
The Antitrust Division of the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) on Oct. 20, 2016, jointly released Antitrust Guidance for Human Resource Professionals, cautioning employers about potential serious antitrust consequences if they enter certain employment-related agreements with competitors. In their Antitrust Guidance, the DOJ and FTC state that employers that enter agreements not to hire employees away from other companies likely violate Section 1 of the Sherman Act and that the DOJ can prosecute criminally the companies that are parties to those agreements – as well as individual employees involved in the illegal conduct.
The antitrust enforcement agencies' interest in the employment area is not new. They have in the past brought antitrust enforcement actions to stop competitors from agreeing not to solicit each other's employees or on the wages or benefits they will provide their workers. The DOJ and FTC view parties to those kinds of agreements as competitors in the employment marketplace and believe that employees are harmed when companies agree not to compete vigorously for their services.
In the past, however, the DOJ and FTC have pursued their enforcement actions only civilly – seeking injunctions to end the illegal agreements. In the new Antitrust Guidance, the DOJ commits to investigate no-poaching or non-solicitation agreements (as well as wage-fixing agreements) as possible criminal violations and, if it finds that an agreement is "naked" (i.e., not connected to a larger legitimate collaboration between the parties to the agreement), to consider felony charges against the companies involved and against their culpable employees. Such "naked" agreements are per se violations of the antitrust laws and, whether pursued criminally or civilly, cannot be defended on the grounds that the defendants established the agreements for arguably good reasons, such as to lower their costs.
Oral or "handshake" agreements between companies concerning their hiring practices can provide the basis for liability under Section 1 of the Sherman Act, and the antitrust enforcement agencies will, even absent direct evidence of an agreement between employers, look to evidence of discussions between employers and parallel conduct by companies to infer the existence of an illegal agreement.
Recommendations for Mitigating Risk
To mitigate the risk of antitrust exposure for unlawful employment-related agreements, companies should promptly evaluate their current recruiting and hiring practices to ensure that no policies or procedures explicitly or implicitly direct HR professionals to engage in potentially problematic practices. Implementation of new or revised policies may be advisable.
Companies should also review form agreements, including the non-solicitation provisions commonly found in service agreements between employers, to ensure that restrictions are narrowly tailored to protect only legitimate business interests. Government contractors should ensure that any employment-related provisions contained in agreements establishing teaming arrangements – including teaming agreements, joint ventures or subcontracts – are reasonably necessary to achieve the purposes of the collaboration.
Employees involved in hiring or recruiting new workers should be clearly directed to avoid communicating with their counterparts at other companies about each company's respective employment terms or practices, so as to avoid creating the appearance of an agreement on employment terms. To the extent that Human Resources employees are not included in regular antitrust compliance training programs, companies should consider either including them in routine training or providing them with targeted training on antitrust considerations in hiring and recruiting.
For additional information on how the DOJ and FTC's Antitrust Guidance could impact your company, contact members of Holland & Knight's Antitrust, Trade Regulation and Competition Team, its Labor, Employment and Benefits Team or its Government Contracts Group.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.