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Human Resources and Criminal Antitrust Prosecutions

As companies seek to attract talented employees in a competitive market, Human Resource officers have to be aware of and avoid serious potential antitrust risks.  The Justice Department’s Antitrust Division has put everyone on notice – corporations will be criminally prosecuted if they enter into anti-competitive agreements with competitors concerning hiring and retention of employees.

The Antitrust Division and the FTC have prosecuted companies under civil antitrust provisions.  However, the Antitrust Division now intends to prosecute such anti-competitive agreements under criminal antitrust laws.  The Antitrust Division has a lot of experience prosecuting criminal cases, and they are interested in finding the appropriate case to make an example.

To provide guidance on this issue, the Antitrust Division has issued a guidance document (here) and a list of red flags (here).

The Antitrust Division’s interest in this area is fairly obvious – agreements among employers not to recruit certain employees or not to compete on terms of compensation are violations of Section 1 of the Sherman Act (15 U.S.C. Section 1).

HR professionals have to avoid entering into agreements with firms that compete to hire employees.  It does not matter whether the agreement is informal or formal, written or unwritten, spoken or unspoken.

Such anti-competitive agreements include agreements about employee salary levels or other terms of compensation at a specific level or within a range, and agreements not to solicit or hire a competitor’s employees (referred to as “no poaching” agreements).

The Antitrust Division prosecuted a number of technology companies for entering into “no poaching” agreements.  These enforcement actions included Intuit, eBay, Lucasfilm, Pixar, Adobe, Apple, Google, Intel, and Pixar.  The Justice Department and the FTC have prosecuted other companies in the healthcare sector and the fashion industry.

As the Justice Department has reiterated on several occasions, the Antitrust Division will criminally prosecute companies and individuals that enter into naked wage-fixing or no-poaching agreements between competitors.  In the Division’s mind, these agreements limit competition and are no different than price-fixing and customer allocation agreements.

Beyond these clear criminal violations, the Antitrust Division has warned HR professionals and others to avoid other types of anti-competitive conduct, including:

  • Express to competitors that you and the others should avoid aggressive competition for employees;
  • Exchange company-specific information about employee compensation or terms of employment with another company;
  • Participate in a meeting, such as a trade association meeting, where the topics of employment compensation and competition is discussed;
  • Discuss the above topics with colleagues at other companies, including during social events or in other non-professional settings;
  • Receive documents that contain another company’s internal data about employee compensation and terms and conditions for employment.

In these days of aggressive competition for employees, HR professionals have to exercise care when approaching potential employees and avoiding potentially illegal interactions with HR professionals from competing companies.

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2 Responses

  1. Excellent and Eye-opening article. Does Sherman Act apply to private, non-profit , for-profit organizations too? Recently there have been noises in Hospital and Healthcare industries where medical professionals, staff nurses were poached . I would like to hear from you on this. Thank you