In late October, the U.S. federal agencies responsible for enforcing antitrust law issued new guidance about anti-poaching and related agreements that you may have missed.
But it’s important to those of you in the U.S., so let me explain.
The Antitrust Guidance for Human Resources Professionals outlines an aggressive policy to investigate and punish employers, and individual recruiters, who enter into unlawful agreements.
Antitrust laws promote free and open markets and protect consumers from anticompetitive business practices. Agreements among competitors to fix prices, or allocate the market to avoid competition harm consumers by increasing prices, and limiting consumer choice. To deter this conduct, federal law imposes remarkably harsh penalties, including treble damages (a monetary penalty of three times the amount of the actual damages suffered). Certain antitrust violations, including price fixing and market allocation agreements are federal crimes, punishable by steep monetary penalties and even incarceration.
Agreements which limit competition for employees receive the same treatment as agreements which limit competition for customers. Agreements among employers to fix employee pay or benefits are viewed in the same way as agreements among competitors to fix the prices of their products. Likewise, agreements not to hire or solicit one another’s employees are treated in the same manner as market allocation agreements. Both types of agreements can be legal if they are part of a larger agreement such as a merger or joint venture. However, entering into so-called “naked agreements,” meaning agreements which are separate from or not necessary to accomplish a larger collaboration, can constitute a federal crime.
The Guidance warns that “going forward, the [U.S. Department of Justice] 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.”
Regulators have taken the aggressive 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.”
The most important takeaway from the Guidance is that recruiters should generally avoid entering into agreements with colleagues at other firms. For example, informal verbal agreements to recruit from different schools or to reduce the value of signing bonuses, can give rise to criminal liability.
Employees responsible for recruiting should also be careful about what they communicate to colleagues at other firms. “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.” A good practice is for employers to draft confidential information policies for recruiters specifying categories of information (such as salaries, benefits, and signing bonuses) which are competitively sensitive and not to be shared outside the firm.
In addition to the Guidance, the government issued a list of Antitrust Red Flags for Employment Practices that recruiters and human resources professionals should look out for in the employment setting. Red flags include:
The above conduct is not necessarily unlawful in all circumstances; however they can raise sufficiently serious concerns to make it worthwhile to consult counsel.