Business and Legal Insights

At the end of last year, the Department of Justice, Antitrust Division (“DOJ”), and the Federal Trade Commission (“FTC”), jointly authored a guidance to address potential violations of anti-trust laws impacting employee hiring and compensation decisions.  The guidance was intended to encourage Human Resources professionals and other decision makers to institute safeguards in situations where companies are attempting to hire the same employees by expressly prohibiting “inappropriate” discussions or agreements.  These rules are intended to encourage competition, which should reap dividends in the form of higher benefits and wages.

The basic and most salient points of the guidance are as follows:

• Firms that are in competition as to the hiring or retention of employees in the marketplace are “competitors” under federal antitrust laws.
• Competitors are prohibited from, expressly or implicitly, formally or informally, in writing or otherwise, agreeing not to compete with one another as to the hiring or retention of employees, the underlying motivation is inconsequential. Examples of prohibited agreements include wage fixing agreements or no poaching agreements.
• Sharing of competitively sensitive information among competitors is similarly prohibited.
• Violation of anti-trust laws has serious consequences and can be the subject of criminal prosecution and civil enforcement actions, including private rights of action for treble damages.

A critical problem with these prohibitions arises in the context of a merger or acquisition.  What can companies do to allow for the exchange of necessary information about the terms and conditions of employment without running afoul of the anti-trust laws?  The DOJ and the FTC suggest that exchanging dated information, permitting the information exchange to be conducted by a neutral third party, and/or aggregating information so as to protect the identity of the underlying sources and to prevent competitors from linking particular data to an individual source are things that can be done to allow for a legal information exchange.  Also, information gathering of sensitive competitive information can be lawful if such information is exchanged in the context of a legitimate merger or acquisition inquiry and precautions are taken during the exchange.

Like other agencies, both the DOJ and the FTC have processes for making inquiries regarding the legality of proposed business ventures between companies.  Allowing these agencies to analyze and comment on the competitive impact of proposed conduct before action is taken can be a strong sword against enforcement actions or lawsuits.

The guidance is largely aimed at the prohibition of so called “naked no-poaching agreements,” and does not address non-competes or employee “non-piracy” provisions that may be contained in employment agreements.