Last week, the Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice (“DOJ”) issued joint guidance (the “Guidance”) for HR professionals explaining how the antitrust laws apply to sharing of employment hiring and compensation information among competing firms. The agencies reiterated that wage-fixing and no-poaching agreements violate the antitrust laws. Such agreements have led to several highly publicized civil enforcement actions in recent years, including three civil enforcement actions against competing technology companies who agreed not to cold call each other’s employees.
Potential Criminal Liability for Naked Wage Fixing and No-Poaching Agreements
DOJ also announced that it intends to pursue criminal investigations of companies and individuals engaging in “naked” wage-fixing and no-poaching agreements — i.e., agreements that are separate from or not reasonably necessary to larger legitimate collaborations. Employees and executives involved in such agreements could be sentenced up to 10 years in prison and fined up to $1 million, and companies could be fined up to $100 million. In some instances, the fines could exceed these amounts. This change represents a significant shift in enforcement policy, as the agencies historically treated such agreements solely as civil matters, and suggests a renewed focus by the agencies in this area. The agencies also intend to continue to pursue civil liability for agreements that are not pursued as criminal matters.
Potential Civil Liability for Information Sharing
The Guidance further recommends that HR professionals avoid sharing sensitive information regarding employee compensation or other terms of employment with their competitors. Even when there is no explicit agreement, information sharing can lead to anticompetitive effects, such as decreased employee compensation. Because of the potential for anticompetitive effects, information sharing can result in civil antitrust liability.
It should be noted, however, that not all information sharing creates risk. If properly designed, wage surveys and similar information exchanges can comply with the antitrust laws. Similarly, exchanges during mergers or acquisitions can be implemented in a manner that mitigates antitrust risk. To assist HR professionals confronted with decisions about whether and how to share sensitive information regarding employee compensation or other terms of employment, the agencies also released an accompanying Quick Reference Card providing a list of antitrust “red flags.”
Final Observations
The Guidance signals an increased enforcement focus by the FTC and DOJ on wage-fixing and no-poaching agreements, as well as the sharing of employee compensation information and other terms of employment among competing firms. Before sharing such information with competitors, companies and HR professionals should carefully consider the potential legal implications and take steps to avoid antitrust liability.
For more information regarding the Guidance, sharing of employment information, and antitrust compliance, please contact Anthony Aaron or Eric McKeown.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
Source: Ice Miller, an IMA member law firm
