FOR H UMAN R ESOURCE

ANTITRUST GUIDANCE

FOR H UMAN R ESOURCE

PROFESSIONALS

D EPARTMENT OF J USTICE

ANTITRUST D IVISION

FEDERAL TRADE COMMISSION

O CTOBER 2016

This document is intended to alert human resource (HR)

professionals and others involved in hiring and

compensation decisions to potential violations of the

antitrust laws. The Department of Justice Antitrust

Division (DOJ or Division) and Federal Trade Commission

(FTC) (collectively, the federal antitrust agencies) jointly

enforce the U.S. antitrust laws, which apply to

competition among firms to hire employees. An agreement

among competing employers to limit or fix the terms of

employment for potential hires may violate the antitrust

laws if the agreement constrains individual firm decisionmaking with regard to wages, salaries, or benefits; terms

of employment; or even job opportunities. HR

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.

The antitrust laws establish the rules of a competitive

employment marketplace.

Free and open markets are the foundation of a vibrant economy. Just as

competition among sellers in an open marketplace gives consumers the

benefits of lower prices, higher quality products and services, more choices,

and greater innovation, competition among employers helps actual and

potential employees through higher wages, better benefits, or other terms of

employment. Consumers can also gain from competition among employers

because a more competitive workforce may create more or better goods and

services.

From an antitrust perspective, firms that compete to hire or retain employees

are competitors in the employment marketplace, regardless of whether the

firms make the same products or compete to provide the same services. It is

unlawful for competitors to expressly or implicitly agree not to compete with

one another, even if they are motivated by a desire to reduce costs. Therefore,

HR professionals should take steps to ensure that interactions with other

employers competing with them for employees do not result in an unlawful

agreement not to compete on terms of employment. Any company, acting on

its own, may typically make decisions regarding hiring, soliciting, or

recruiting employees. But the company and its employees should take care

not to communicate the company’s policies to other companies competing to

hire the same types of employees, nor ask another company to go along.

The federal antitrust agencies have taken enforcement actions against

employers that have agreed not to compete for employees. Based on those

cases, here are some general principles to help HR professionals and the

companies they represent avoid running afoul of the antitrust laws as they

relate to agreements and communications among employers. Note that this

guidance does not address the legality of specific terms contained in contracts

between an employer and an employee, including non-compete clauses.

Violations of the antitrust laws can have severe consequences. Depending on

the facts of the case, the DOJ could bring a criminal prosecution against

individuals, the company, or both. And both federal antitrust agencies could

bring civil enforcement actions. In addition, if an employee or another private

party were injured by an illegal agreement among potential employers, that

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party could bring a civil lawsuit for treble damages (i.e., three times the

damages the party actually suffered).

Agreements among employers not to recruit certain employees or

not to compete on terms of compensation are illegal.

An HR professional should avoid entering into agreements regarding terms of

employment with firms that compete to hire employees. It does not matter

whether the agreement is informal or formal, written or unwritten, spoken or

unspoken.

An individual likely is breaking the antitrust laws if he or she:

•

agrees with individual(s) at another company about employee

salary or other terms of compensation, either at a specific level or

within a range (so-called wage-fixing agreements), or

•

agrees with individual(s) at another company to refuse to solicit or

hire that other company’s employees (so-called “no poaching”

agreements).

Even if an individual does not agree orally or in writing to limit employee

compensation or recruiting, other circumstances – such as evidence of

discussions and parallel behavior – may lead to an inference that the

individual has agreed to do so.

Naked wage-fixing or no-poaching agreements among employers, whether

entered into directly or through a third-party intermediary, are per se illegal

under the antitrust laws. That means that if the agreement is separate from

or not reasonably necessary to a larger legitimate collaboration between the

employers, the agreement is deemed illegal without any inquiry into its

competitive effects. Legitimate joint ventures (including, for example,

appropriate shared use of facilities) are not considered per se illegal under

the antitrust laws.

The DOJ filed a civil enforcement action against the Arizona Hospital &

Healthcare Association for acting on behalf of most hospitals in Arizona to set

a uniform bill rate schedule that the hospitals would pay for temporary and

per diem nurses. The case resulted in a consent judgment. And in the past

few years, the DOJ brought three civil enforcement actions against

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technology companies (eBay and Intuit, Lucasfilm and Pixar, and Adobe,

Apple, Google, Intel, Intuit, and Pixar) that entered into “no poach”

agreements with competitors. In all three cases, the competitors agreed not to

cold call each other’s employees. In two cases, at least one company also

agreed to limit its hiring of employees who currently worked at a competitor.

All three cases ended in consent judgments against the technology

companies. The FTC has brought two cases relating to competition for

employment. One was against Debes Corp. for entering into agreements to

boycott temporary nurses’ registries in order to eliminate competition among

the nursing homes for the purchase of nursing services. The FTC also

brought a case against the Council of Fashion Designers of America and the

organization that produces the fashion industry’s two major fashion shows for

attempting to reduce the fees and other terms of compensation for models.

Both cases ended in consent judgments.

Going forward, the DOJ intends to proceed criminally against naked wagefixing or no-poaching agreements. These types of agreements eliminate

competition in the same irredeemable way as agreements to fix product

prices or allocate customers, which have traditionally been criminally

investigated and prosecuted as hardcore cartel conduct. Accordingly, the DOJ

will criminally investigate allegations that employers have agreed among

themselves on employee compensation or not to solicit or hire each others’

employees. And if that investigation uncovers a naked wage-fixing or nopoaching agreement, the DOJ may, in the exercise of its prosecutorial

discretion, bring criminal, felony charges against the culpable participants in

the agreement, including both individuals and companies.

Avoid sharing sensitive information with competitors.

Sharing information with competitors about terms and conditions of

employment can also run afoul of the antitrust laws. Even 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. While agreements to share information are not per

se illegal and therefore not prosecuted criminally, they may be subject to civil

antitrust liability when they have, or are likely to have, an anticompetitive

effect. Even without an express or implicit agreement on terms of

compensation among firms, evidence of periodic exchange of current wage

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information in an industry with few employers could establish an antitrust

violation because, for example, the data exchange has decreased or is likely to

decrease compensation. For example, the DOJ sued the Utah Society for

Healthcare Human Resources Administration, a society of HR professionals

at Utah hospitals, for conspiring to exchange nonpublic prospective and

current wage information about registered nurses. The exchange caused

defendant hospitals to match each other’s wages, keeping the pay of

registered nurses in Salt Lake County and elsewhere in Utah artificially low.

The case ended in a consent judgment so that registered nurses could benefit

from competition for their services.

Even if participants in an agreement are parties to a proposed merger or

acquisition, or are otherwise involved in a joint venture or other collaborative

activity, there is antitrust risk if they share information about terms and

conditions of employment.

However, not all information exchanges are illegal. It is possible to design

and carry out information exchanges in ways that conform with the antitrust

laws. For example, an information exchange may be lawful if:

•

a neutral third party manages the exchange,

•

the exchange involves information that is relatively old,

•

the information is aggregated to protect the identity of the underlying

sources, and

•

enough sources are aggregated to prevent competitors from linking

particular data to an individual source.

Also, in the course of determining whether to pursue a merger or acquisition,

a buyer may need to obtain limited competitively sensitive information. Such

information gathering may be lawful if it is in connection with a legitimate

merger or acquisition proposal and appropriate precautions are taken.

For more information on information exchanges, you can review the DOJ’s

and FTC’s specific guidance to the healthcare industry on when written

surveys of wages, salaries, or benefits are less likely to raise antitrust

concerns (see Statement 6).

If your company is considering sharing specific information or otherwise

collaborating with competitors regarding compensation or other terms of

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employment, and you have questions regarding the legality of the activity,

the federal antitrust agencies are available to offer further guidance. The

Division has a business review process that enables businesses to determine

how the Division may respond to proposed joint ventures or other business

conduct. The FTC has a similar process for obtaining an advisory opinion for

future conduct. When the federal antitrust agencies are able to analyze and

comment on the possible competitive impact of proposed business conduct

before that conduct is implemented, companies are more likely to avoid

enforcement investigations and lawsuits.

__________

Questions and Answers

Question : I work as an HR professional in an industry where we spend a

lot of money to recruit and train new employees. At a trade show, I

mentioned how frustrated I get when a recent hire jumps ship to work at a

competitor. A colleague at a competing firm suggested that we deal with this

problem by agreeing not to recruit or hire each other’s employees. She

mentioned that her company had entered into these kinds of agreements in

the past, and they seemed to work. What should I do?

Answer: What that colleague is suggesting is a no-poaching agreement.

That suggestion amounts to a solicitation to engage in serious criminal

conduct. You should refuse her suggestion and consider contacting the

Antitrust Division’s Citizen Complaint Center or the Federal Trade

Commission’s Bureau of Competition to report the behavior of your

colleague’s company. If you agree not to recruit or hire each other’s

employees, you would likely be exposing yourself and your employer to

substantial criminal and civil liability.

Question : My friend and I are both managers at different companies in

an industry where employee wage growth seems to be out of control. Over

lunch, my friend proposed that we could solve this problem by reaching out to

other industry leaders to establish a more reasonable pay scale for our

employees. Is this legal?

Answer: An agreement among competitors to set wages or establish a

pay scale is an illegal wage-fixing agreement. If you take your friend’s

suggestion and form such an agreement on behalf of your company with your

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friend or others acting on behalf of their companies, you would likely be

exposing yourself and your employer to substantial criminal and civil

liability. The DOJ could open a criminal investigation, and if it determines

that your agreement is a naked wage-fixing agreement, it could bring

criminal charges against you, your employer, your friend, and other

individuals or companies that participate in the agreement. Participants

could also be subject to substantial civil liability.

Additionally, merely inviting a competitor to enter into an illegal

agreement may be an antitrust violation – even if the invitation does not

result in an agreement to fix wages or otherwise limit competition. In

antitrust terms, an “invitation to collude” describes an improper

communication to an actual or potential competitor that you are ready and

willing to coordinate on price or output or other important terms of

competition. For instance, the FTC took action after an online retailer

emailed a competitor to suggest that both companies sell their products at

the same price, which was higher than either company was charging. The

competitor declined the invitation and notified the FTC. Be aware that

private communications among competitors may violate the FTC Act if (1) the

explicit or implicit communication to a competitor (2) sets forth proposed

terms of coordination (3) which, if accepted, would constitute a per se

antitrust violation.

Question : I work as a senior HR professional at a nonprofit organization

that works hard to keep costs down so we can serve more people. One idea we

had is to cap wage increases for certain employee groups, but we are worried

that we might lose employees to other nonprofit organizations that don’t cap

wage increases. So, I would like to call other nonprofit organizations in my

region to ask them if they would consider a cap on wage growth rates as well.

Should I do that? What if, instead of reaching out to other nonprofit

organizations directly, we all agree to hire the same consultant who

communicates the pay scale to the nonprofit organizations?

Answer: No. You would likely violate antitrust law if you and the other

nonprofit organizations agreed to decrease wages or limit future wage

increases. A desire to cut costs is not a defense. Your nonprofit organization

and the others are competitors because you all compete for the same

employees. It does not matter that your employer and the other organizations

are not-for-profit; nonprofit organizations can be criminally or civilly liable

for antitrust law violations. It also makes no difference if you propose to hire

a consultant who will determine and set the pay scale; employing a thirdDO J/FTC ANTITRUST GUIDANCE FO R HR PRO FESSIO NALS

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party intermediary does not insulate you or your organization from liability

under the antitrust law.

Question: I work in the HR department of a university that sometimes

gets into bidding wars to attract faculty from rival institutions. Those efforts

rarely succeed, but they take up a lot of time, energy, and resources. Recently

someone in the Dean’s office told me that we now had a “gentleman’s

agreement” with another university not to try to recruit each other’s senior

faculty. There isn’t a written agreement, and efforts to hire each other’s

faculty were rarely successful. Is this okay?

Answer: No. An illegal agreement can be oral; it need not be written

down on paper. This conduct is similar to the conduct challenged by the

Division in its recent no-poaching cases involving eBay, Lucasfilm, and

Adobe, and the FTC in its cases against Debes Corp. and the Council of

Fashion Designers. If the no-poaching agreement is naked, that is, separate

from or not reasonably necessary to a larger legitimate collaboration between

the universities, it is conduct that the Division will criminally investigate and

may decide to criminally prosecute, charging institutions or individuals or

both.

If you stopped recruiting and bidding for faculty from another

university due to a gentleman’s agreement, you have become a member of

that no-poaching agreement and could be subject to criminal liability. You

should take no further action to comply with that agreement, and notify your

university’s legal counsel of the university’s participation in this illegal

agreement. The university may wish to report the conduct to the Division

under its Corporate Leniency Policy, which provides that the first qualifying

corporation (including universities and other non-profit entities) to report the

antitrust offense and cooperate with the Division’s investigation will not be

criminally charged for the reported antitrust offense. If you have already

participated in the illegal agreement, you may wish to report the conduct to

the Division under its Leniency Policy for Individuals, which provides that

the first qualifying individual to report the antitrust offense and cooperate

with the Division’s investigation will not be criminally charged for the

reported antitrust offense. For more information on these policies, see this

link.

Question: I am the CEO of a small business. In my industry, firms

traditionally offer gym memberships to all employees. Gym membership fees

are increasing, so I would like to stop offering memberships, but I am worried

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that current employees will become disgruntled and move to other

companies. I would like to ask other firms in the industry to stop offering

gym memberships, as well. Can I do that?

Answer: No, you would likely violate antitrust law if you and the other

companies agreed to cease offering gym memberships. Job benefits such as

gym membership, parking, transit subsidies, meals, or meal subsidies and

similar benefits of employment are all elements of employee compensation.

An agreement with a competitor to fix elements of employee compensation is

an illegal wage-fixing agreement.

Question : I am an HR professional who serves on the board of our

industry’s professional society. We are interested in determining current and

future trends in industry wages. Can we distribute a survey asking

companies within the industry about current and future wages?

Answer: It may be unlawful for you, a member of the industry, to

solicit a competitor’s company-specific response to a wage survey that asks

about current or future wages, or to respond to a competitor’s request to

provide such information. In addition, it may be unlawful for the professional

society to distribute company-specific information about past, current, and

future wages. Competitors’ exchange of nonpublic, company-specific

information about current and future wages may violate antitrust law, unless

certain survey procedures are followed to mitigate the risk of competitive

harm.

For more guidance on the antitrust treatment of information

exchanges among competitors, see Statement 6 of the DOJ’s and FTC’s

guidance to the healthcare industry.

Question : I am a new HR professional, and I am attending my first

professional conference next week. What should I watch out for to avoid

violating antitrust law?

Answer: You should not enter into agreements about employee

compensation, other terms of employment, or employee recruitment with

other HR professionals who work at competitors, meaning other companies

that compete for the same types of employees. Also, avoid discussing specific

compensation policies or particular compensation levels with HR

professionals who work for competitors.

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Other resources are available.

The federal antitrust agencies have prepared a list of red flags that HR

professionals and others should look out for in employment settings.

When in doubt, seek legal assistance.

If HR professionals have questions regarding whether particular conduct

violates the antitrust laws, they should consider seeking legal advice.

Report potential violations.

If HR professionals or other interested parties have information about a

possible antitrust violation regarding agreements among competitors to fix

wages, salaries, benefits, or other terms of employment, or agreements not to

compete for employees in hiring decisions, the federal antitrust agencies

encourage them to report such conduct.

Reports can be made to the Division through the Citizen Complaint Center

by e-mail (antitrust.complaints@usdoj.gov), phone (1-888-647-3258, toll free

in the U.S. and Canada, or 202-307-2040), or mail (Citizen Complaint Center,

950 Pennsylvania Avenue, NW, Room 3322, Washington, DC 20530).

Reports can be made to the FTC through the Bureau of Competition’s Office

of Policy and Coordination by email (antitrust@ftc.gov), phone (202-3263300), or mail (Office of Policy and Coordination, Room CC-5422, Bureau of

Competition, Federal Trade Commission, 600 Pennsylvania Avenue, NW,

Washington, DC 20580).

The federal antitrust agencies encourage HR professionals or others with

information to use the following questions as a guideline to describe your

complaint.

•

What are the names of companies, individuals, or organizations that

are involved?

•

In what manner have these companies, individuals, or organizations

potentially violated the federal antitrust laws?

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•

What examples can you give of the conduct that you believe may

violate the antitrust laws? Please provide as much detail as possible.

•

Who is affected by this conduct?

•

How do you believe competition may have been harmed?

•

What is your role in the situation?

With respect to potential criminal violations, in particular, it can be

beneficial to report personal involvement in an antitrust violation quickly.

Through the Division’s leniency program, corporations can avoid criminal

conviction and fines, and individuals can avoid criminal conviction, prison

terms, and fines, by being the first to confess participation in a criminal

antitrust violation, fully cooperating with the Division, and meeting other

specified conditions. Additional information about the leniency program is

available here.

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