The federal government announced last month that it's looking at no-poaching and wage-fixing agreements, and “has a handful of criminal cases in the works.” It remains to be seen what kind of enforcement actions might happen and when, but legal experts agree: It’s just a matter of time.
“There are active investigations," Lauren Donahue, an attorney in the Chicago office of K&L Gates LLP, told HR Dive. Lisa Sullivan, a Chicago-based attorney with Nixon Peabody LLP, agreed: “It’s definitely on the radar screen."
The U.S. Department of Justice (DOJ) declined to comment when asked via email for details.
On Jan. 19, Makan Delrahim, assistant attorney general for DOJ's antitrust division, told attendees at a conference that, over the next few months, the agency would be announcing indictments over no-poach agreements and “naked wage-fixing” agreements.
No-poach agreements occur when companies agree not to recruit or hire each other's employees. Naked wage-fixing agreements are agreements to restrict wages and benefits that are not tied to a legitimate collaboration or joint ventures between companies.
Delrahim is widely reported to have told conference attendees that he was “shocked" about how many of these agreements there are.
DOJ’s position is that these arrangements restrain competition for employees and may constitute per se, or automatic, violations of antitrust laws.
Such agreements have been on the feds’ radar since at least late 2016 when DOJ and the Federal Trade Commission issued a guidance document for human resource professionals in which it affirmed that it is illegal for employer representatives to agree to fix wages or to not hire one another’s workers. The agencies also announced that they intended to pursue criminal charges against companies and individuals involved in those activities.
Specifically, that means that corporations and “culpable individuals" could see significant fines and jail time. Corporations found guilty of criminal violation of antitrust laws face fines of up to $100 million, while individuals may be subject to up to 10 years' imprisonment and fines of up to $1 million.
HR professionals were specifically targeted in the guidance, with DOJ and the FTC noting that such individuals are are often in the best position to ensure compliance.
Before the October 2016 guidance was released, enforcement had been handled through civil proceedings brought by DOJ and the FTC, although criminal liability was always a possibility. Many expected the Trump Justice Department to have less interest in the Obama-era policy shift from civil to criminal enforcement, but Trump Administration officials have made it clear that they intend to continue the effort to add criminal enforcement to the compliance mix.
Several months before Delrahim’s statements, Andrew Finch, DOJ’s acting assistant attorney general for antitrust, confirmed the administration’s commitment to the new approach.
Audits and reporting tools
There are steps HR professionals can take to avoid liability. First, understand the basics; don’t share competitively sensitive information regarding wages, salaries, benefits, terms of employment or recruitment strategies unless it is for a legitimate business purpose such as a joint venture, merger or an acquisition.
And that warning doesn't only apply to written information or agreements, Donahue said; “a gentlemen’s handshake or nod” is enough to create liability.
An antitrust audit of employee and other contractual agreements is a good idea, too, the attorneys said. For example, a lot of supplier agreements have a “no solicit provision,” notes James Tierney, an attorney in the Washington, D.C. office for Orrick Herrington & Sutcliffe LLP. Even if the provisions are “boilerplate” and not enforced, they need to be examined to determine whether they are lawful, Tierney told HR Dive.
Sullivan said questions often arise when there is a non-compete agreement between two companies. They settle the non-compete, she said; then, in the settlement agreement, agree not to compete for each other’s employees for a specified amount of time.
Whether this is related to the settlement of the non-compete or whether it is now a no-poach agreement is a fine line, Sullivan said. So, she suggested, when settling litigation between companies that involve non-compete agreements, theft of trade secrets or similar issues, be very careful not to enter into a no-poach agreement.
Additionally, make sure that compliance programs have a reporting tool so that if someone believes there is a problem, they know who they should be reporting it to within the organization, Donahue said.
Compliance must be considered in a broad sense. Donahue said that, when considering antitrust laws, a lot of companies think about not entering into agreements with their direct competitors. But, in this context, the relevant market is employees; that broadens the type of companies and individuals with which you cannot enter into agreement and with which you can’t share competitive information, she said.
Tierney agreed. “What some don’t understand is that these rules apply to situations where the two companies may not actually be competitors in the industry," he said. "For example, one company makes software and one makes telephones. But, they are competing for employees, for those particular skills."
Training and best practices
Compliance training for HR professionals and company executives is important, the attorneys said. But Donahue pointed out that often, the HR department is not included in antitrust training.
The October 2016 guidance, with its examples of anticompetive scenarios, should be a component of antitrust compliance training. No-poach agreements are not limited to the HR department, Tierney noted; sometimes they start with higher-level executives and HR is expected to enforce them.
Employers also may want to note that there is a bit of a “get out of jail” card in some instances. Donahue explained that DOJ's antitrust division has an amnesty program that provides protection from criminal prosecution, including fines and jail time, for both companies and corporate executives, if the company is the first to come forward with information about the anticompetitive conduct. But, participation in the program doesn’t protect against civil litigation, so compliance from the outset is key.