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Nov 04, 2016

Antitrust Law in Human Resources

By: Allison Mann

Human resources is generally not the first topic the average person thinks about when they hear the term antitrust law. Antitrust laws are put in place to protect consumers by promoting competition. General examples of anticompetitive behavior include creating monopolies and price-fixing. These laws have gained recent attention with the proposed Time Warner and AT&T merger.

However, antitrust law is a topic that human resource professionals must not ignore. Federal agencies have exhibited a renewed commitment to enforcing the laws against firms for certain employment practices, and those agencies have taken a rather aggressive approach. A number of companies, including EBay, Pixar, Adobe, Apple, Google and Intuit, have all been sued over this type of anticompetitive behavior. In October 2016, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) jointly published Antitrust Guidance for Human Resource Professionals (the “Guidance”), in order to alert employers to potential violations of the law, of which they may not have been aware.

What Constitutes Anticompetitive Behavior?

Antitrust laws mandate that the marketplace for employment must be competitive in wages, salaries and benefits. Anticompetitive behavior in employment is found where competitive companies (i.e. companies that seek to hire the same employees) engage in behavior that lessens that competition. Two examples were stressed in the guidance: (1) wage-fixing agreements; and (2) no poaching agreements.

First, a wage fixing agreement is any situation where two or more competitors agree to offer employees the same wage, salary or benefits. For example, a group of human resource managers at different companies establish a “reasonable” pay scale for employees. Another example is found where two companies agree that they will not offer their employees certain benefits, such as free gym memberships. Both of these situations violate antitrust law.

Second, is the no poaching agreement, which is any situation where companies agree not to solicit employees from their competitors. Recently, a group of technology and animation companies have run afoul of this aspect of the law. The companies allegedly agreed that they would not “cold call” the other companies’ employees. A sizable class action lawsuit has been brought seeking damages in the hundreds of millions of dollars. In fact, one of the defendant companies has offered a $50 million settlement in order to be released. This settlement has not been approved.

These two types of activities are per se illegal. However, many situations are not as cut and dry. There are very few situations where two companies will enter into express agreements to collude. Implied agreements are also actionable. The Guidance stresses that an “agreement” can be found where two or more companies simply share competitive information.

The Takeaway: Avoid Antitrust Violations

The Guidance not only provides direction to HR professionals. It shows how seriously the DOJ and FTC take this type of anticompetitive behavior. The Guidance describes these situations as akin to “hardcore cartel conduct.” It is clear that these agencies will criminally prosecute wage-fixing or no poaching agreements. And in these situations, not only is the company itself liable, but the individual human resource professional that participated in the conduct can be held personally liable.

In short, it is in an employer’s (and the HR professional’s) best interest to avoid violating these laws. The following guidelines will help employers avoid such violations.:

    • Do not enter into any agreement with a competitor that may reduce competition in employment.

    • Do not talk about entering into any agreement that may reduce competition in employment. The FTC has taken action against companies simply for making an offer to enter an anticompetitive agreement, where no agreement was actually entered.

    • Avoid sharing any information regarding terms of employment with your competitors. This includes wages, salary, and benefits. If you need to share this type of information be very careful and consider seeking an opinion on the potential legal consequences.

    • Make sure that individuals in charge of employment decisions including recruitment activities and setting salaries and benefits are aware of the law. However, remember that you cannot suppress your employees’ rights to discuss this type of information under the NLRA.
These are just a few general tips. For more specific guidance, contact competent legal counsel.

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Reprinted with permission from an article submitted for publication in the November, 2016 Southwest Area Human Resource Association newsletter.