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Featured on Employment Law This Week:  No relief is expected from the Trump administration on anti-poaching agreements.

2016 guidance from the DOJ and FTC put employers on notice that agreements between companies not to poach employees, or to limit the compensation paid to some employees, could violate antitrust laws. There had been some speculation that President Trump’s DOJ would back away from this policy, but recent comments by the Assistant Attorney General for the Antitrust Division indicated that new administration will support the policy, and promised several announcements in the coming months.

Watch the segment below and read our recent post.

On October 20, 2016—just about three weeks before the presidential election won by Donald Trump—the Department of Justice and the Federal Trade Commission issued a remarkable document, entitled “Antitrust Guidance for Human Resources Professionals,” which outlined an aggressive policy promising to investigate and punish employers, and even individual Human Resources employees, who enter into unlawful agreements concerning recruitment or retention of employees.  As stated in that document, “[a]n 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 decision-making with regard to wages, salaries or benefits; terms of employment; or even job opportunities.”

For over a year, a question on the minds of many practitioners was whether the Antitrust Guidance document and policy would remain a priority for the DOJ and FTC under President Trump.  Those agencies had not issued public pronouncements, and there was uncertainty over whether conduct like wage-fixing and no-poaching agreements would continue to warrant serious civil or criminal scrutiny.  Would the new administration continue the Obama Administration’s antitrust guidance initiative or would it lean more toward a more laissez-faire, do-not-interfere with corporate management philosophy?

We may now have the answer.  The Trump administration has voiced support of this Obama-era policy.  On Jan. 19, 2018, U.S. Assistant Attorney General for the Antitrust Division Makan Delrahim remarked at a conference that if employers have engaged in no-poaching or wage-fixing agreements since the issuance of the policy, their actions will be treated as criminal.  He noted the Antitrust Division has “been very active” in reviewing potential violations, and that, “[i]n the coming couple of months, you will see some announcements, and to be honest with you, I’ve been shocked about how many of these there are, but they’re real.”

Employers and practitioners should stay tuned for these announcements from the Antitrust Division.

The top story on Employment Law This Week: The DOJ intends to investigate anti-competitive trade practices.

The Department of Justice and the Federal Trade Commission released joint guidance for HR professionals on how antitrust laws apply to employment. The guidance explains that agreements among employers not to recruit certain employees—or not to compete on terms of compensation—are illegal. Notably, the DOJ announced that they plan to criminally investigate “naked no-poaching or wage fixing agreements” that are unrelated to legitimate collaboration between businesses. In the past, both agencies have pursued civil enforcement. Peter Altieri, co-editor of this blog and a Member of the Firm at Epstein Becker Green, is interviewed.

Watch the segment below and read our previous post on this topic.

Political winds disfavoring non-compete agreements for low wage and rank-and-file workers continue to blow, and appear to be picking up speed.

On October 25, 2016, the White House took the unusual step of issuing a “Call to Action” to states regarding non-compete agreements, as part of the President’s initiative to stoke competition across the economy.  Calling non-competes an “institutional factor that has the potential to hold back wages and entrepreneurship,” the Call to Action seeks to reduce the misuse of non-compete agreements nationwide.

President Obama called on state policymakers to join in pursuing best-practice policy objectives, including:

  1. Banning non-compete clauses for categories of workers (such as low wage workers or workers laid off or terminated without cause);
  2. Improving transparency and fairness of non-compete agreements; and
  3. Incentivizing employers to write enforceable contracts (i.e., discouraging overreaching provisions) by, for example, promoting the “red pencil doctrine” which renders contracts with unenforceable provisions void in their entirety.

Immediately answering the White House’s Call to Action, New York Attorney General Eric T. Schneiderman announced on October 25, 2016 that he would introduce legislation in New York’s state legislature in 2017 “to curb the rampant misuse of non-compete agreements, which depress wages and limit economic mobility.”

Among other things, the proposed New York bill would prohibit the use of non-competes for any employee below the salary threshold set by Labor Law Section 190(7) (currently $900 per week); would require non-competes to be provided to individuals before a job offer is extended; and would require employers to pay employees additional consideration if they sign non-competes.

Employers thus should review their non-competes to ensure that they are narrowly drafted and should re-evaluate the categories of employees asked to sign them, so as to confirm that only those who truly pose a competitive threat are asked to sign a non-compete.

Also, the Call to Action falls in line with Guidelines recently issued by the Department of Justice and Federal Trade Commission, which outline an aggressive policy to investigate and punish employers and individual human resources employees who enter into unlawful agreements concerning employee recruitment or retention.

Following up on a string of civil enforcement actions and employee antitrust suits, regarding no-poaching agreements in the technology industry, on October 20, 2016 the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) issued Antitrust Guidance for Human Resources Professionals (the “Guidance”). The Guidance outlines an aggressive policy to investigate and punish employers, and individual human resources employees who enter into unlawful agreements concerning employee recruitment or retention.

The Guidance focuses on three types of antitrust violations:

  • Wage fixing agreements: agreements among employers to fix employee compensation or other terms or conditions of employment at either a specific level or within a range;
  • No poaching agreements: certain agreements among employers not to solicit or hire one another’s employees not ancillary to an overarching pro-competitive collaboration; and
  • Unlawful information exchanges: exchanges of competitively sensitive information which facilitate wage matching among market participants.

“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.” The Guidance goes on to warn that “going forward, the DOJ intends to proceed criminally against naked wage fixing 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 investigated and prosecuted as hardcore cartel conduct.”

“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.” Information sharing agreements which have anticompetitive effects are subject to civil antitrust liability, including treble damages (a monetary penalty of three times the amount of the actual damages suffered). The FTC has taken the position that “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.”

Antitrust Red Flags

In addition to the Guidance, the FTC and DOJ issued a list of Antitrust Red Flags for Employment Practices that human resources professionals should look out for in the employment setting. Red flags include:

  • Agreements with another company about employee salary or other terms of compensation either at a specific level or within a range;
  • Agreements with another company to refuse to solicit or hire that other company’s employees;
  • Agreements with another company about employee benefits;
  • Agreements with another company on other terms of employment;
  • Expressing to competitors that they should not compete too aggressively for employees;
  • Exchanging company-specific information about employee compensation or terms of employment with another company;
  • Participating in a meeting, including a trade association meeting, where the above topics are discussed;
  • Discussing the above topics with colleagues at other companies, including during social events or in other non-professional settings; and
  • Receiving documents that contain another company’s internal data about employee compensation or benefits.

The above conduct is not necessarily unlawful in all circumstances. However, best practice is to consult counsel prior to engaging in this conduct to avoid antitrust law violations and if possible, restructure the agreement or information exchange to accomplish its intended legal purpose.