DOJ, FTC Issue New Antitrust Guidelines on Business Practices Impacting Workers
Highlights
- A week before the change in presidential administrations, the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) released new guidance on business practices affecting workers that may violate antitrust laws.
- The new guidance summarizes recent developments in antitrust laws regarding allegedly anticompetitive agreements and practices, including noncompete agreements, information sharing and the use of data algorithms.
- Though the new guidance purportedly reinforces concepts already established under current law, it remains to be seen whether it will survive the change in administration and have a long-term impact on key issues in employment and antitrust law.
Less than a week before the administration change from former President Joe Biden to President Donald Trump, the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) released new guidance highlighting business practices and agreements affecting workers that the agencies will potentially scrutinize and take action against, claiming that the new guidance violates antitrust laws.
In recent years, the agencies have prioritized their antitrust enforcement activities protecting workers from alleged anti-competitive agreements. For the first time since 2016, the agencies issued new guidelines outlining key practices that may violate antitrust laws, including noncompete agreements, no-poach agreements and certain restrictions on worker mobility. The guidelines provide examples and references to court decisions to illustrate how the agencies investigate certain business practices under current antitrust laws. The guidelines replace the 2016 Antitrust Guidance for Human Resource Professionals.
The agencies assert that the goal of the new guidelines is to "promote clarity and transparency for the public about how the agencies identify and assess business practices affecting workers that may violate the antitrust laws." In that effort, the guidelines highlight several key points:
- The agencies will closely scrutinize business practices of companies that operate in the same labor market and thus compete for workers. They will do so even if the companies are engaged in a permissible cooperative relationship, such as a joint venture or franchise relationship, even if the companies do not compete in the same market for goods or services.
- The agencies will scrutinize potential anti-competitive conduct directed at all workers, including employees and independent contractors.
- Although the guidelines are focused on the types of agreements that may violate antitrust law, they also emphasize that the agencies may investigate and take action against companies that make misleading claims to workers about potential compensation. For example, in recent years the FTC has taken action against companies that falsely advertised that workers would earn substantially more compensation than they did.
The guidelines also include non-exhaustive examples of agreements or business practices that potentially violate antitrust laws:
- No-Hire Agreements or Wage-Fixing Agreements Between Companies. These include agreements between companies or individuals about workers' salaries or compensation, either at a specific level or within a range, and agreements not to hire or solicit current, former or potential workers. Even an agreement not to "cold call" workers is considered a no-solicit agreement. Companies that engage in these types of agreements face both civil penalties and potential criminal liability. Since 2016, when the DOJ first announced its intention to pursue criminal charges against employers entering into "naked" no-poach and wage-fixing agreements, the DOJ has pursued criminal charges against individuals and companies allegedly involved in these agreements.1
- No-Poach Agreements in the Franchise Context Even if They Are Between a Franchisor and a Franchisee. The guidelines specify that these types of agreements to not compete for workers, regardless of whether they're written, may violate antitrust laws. Without elaboration, the guidelines implicitly reject franchisors' assertions that certain noncompete agreements are needed to incentivize franchisees to invest in training employees. Otherwise, franchisees may be unlikely to engage in training if other franchisees can simply hire away their trained employees.
- Agreements Regarding the Exchange of Competitively Sensitive Information, Such as Compensation or Terms of Employment, with Companies That Compete for Workers. The guidelines note that this type of arrangement may violate the antitrust laws even if the company uses a third-party intermediary, including a third party using an algorithm or other software. Agreements to share information and to generate wage or other benefit recommendations may be illegal even if used only for information purposes and if the company does not strictly adhere to those recommendations.
- Noncompete Agreements That Preclude an Employee from Joining a Competitor or Starting a New Business. Agreements that prevent workers from competing at another job were scrutinized closely by the agencies throughout the Biden Administration. In April 2024, the FTC issued a final rule banning most noncompete agreements. Although the rule was to take effect on Sept. 4, 2024, a federal judge in Texas issued an order setting aside the rule. The case is currently on appeal, and the future of the rule is uncertain.
- Agreements That Contain Overly Broad Nondisclosure Agreements, Training Repayment Agreement Provisions, Nonsolicitation Agreements and Exit Fee or Liquidated Damages Provisions. The agencies note that they may investigate and take action against any restrictive agreements that may impede employees' job mobility or undermine competition as whole.
Although the guidelines provide a clear indication how the agencies analyzed business practices affecting workers under the Biden Administration, it remains to be seen what impact, if any, they will have in the Trump Administration. In a dissenting statement, FTC Commissioner Andrew Ferguson, joined by fellow Commissioner Melissa Holyoak, wrote that "the lame-duck Biden-Harris FTC should not replace existing guidance mere days before they hand over the baton" and that "[t]he Biden-Harris FTC has no future." It is worth noting, however, that the 2016 guidelines survived the first Trump Administration, and the new guidelines might survive, too.
Regardless of what happens with the guidelines, employers should continue to remain informed of the changing legal landscape, especially in the upcoming months. Holland & Knight's Antitrust Team will continue to provide updates about the new guidelines and other developments affecting antitrust compliance issues.
Notes
1 See, e.g., United States v. Neeraj Jindal and John Rodgers, No. 4:20-cr-00358-ALM-KPJ (E.D. Tex.); United States v. Patel et al., No. 3:21-cr-00220 (D. Conn); United States v. Manahe et al., No. 2:22-cr-00013 (D. Maine).
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