What HR managers need to know to avoid antitrust violations
Friday, February 03, 2017
In October 2016, the U.S. Department of Justice (DOJ) published "Antitrust Guidance for Human Resources Professionals" (Guidance) warning them that the agency has taken and will continue to take legal actions against employers for violating federal antitrust laws.
That Guidance confirmed and expounded on similar guidance issued by the DOJ and the Federal Trade Commission (FTC) several times over the past few decades. Even though this information is not new, not every HR professional knows the extent of the risk that can be involved.
The federal government is serious about enforcement of the applicable antitrust laws. Among the companies that have recently run afoul of these laws for anti-competitive activities are big names such as Adobe, Apple, eBay, Google, Intel, Intuit, LucasFilm and Pixar. Large employer associations have also been charged with violations.
Under the antitrust laws, employers, individuals or both can be subject to civil or criminal action by the DOJ and/or the FTC. Employees and other parties who claim they are harmed by the anti-competitive activities can also sue for treble damages (i.e., three times the damages the party actually suffered). So, the risk of noncompliance is significant.
According to the DOJ, firms that compete to hire or retain employees are competitors in the employment marketplace, regardless of whether they make the same products or provide the same services. Without appropriate safeguards, employers could collude or otherwise reduce competition for talent by reducing salaries or other benefits, which in turn could adversely affect the delivery of services or production of products.
Some of the activities that should be avoided under these antitrust laws are:
- Discussing, sharing or attending a meeting where specific, current compensation policies, particular compensation or benefits levels are discussed or shared with HR professionals who work for competitors
- Agreeing to set, cap or reduce wages at or to a particular rate
- Agreeing to grant, limit or do away with certain perquisites, such as gym memberships, parking, transit subsidies, meals, meal subsidies, health or disability insurance or other benefits or terms and conditions of employment
- Entering into no-poaching agreements that prevent one employer from soliciting or trying to hire employees of another
- Soliciting, collecting and/or distributing (by individuals involved in a particular industry association) wages or other company-specific information related to competitors and members of the association
- Entering into any agreement about employee compensation, other terms of employment or employee recruitment with other HR professionals who work for competitors (broadly including any companies that compete for the same type of employees)
Anti-poaching and wage-fixing agreements are per se unlawful, and the government can pursue legal claims even where the parties never acted on or implemented them.
An unlawful anti-competitive agreement can be oral; it need not be written. Plus, the place where the unlawful conduct can occur is not limited to official business or professional meetings. It can occur in informal or social settings, over dinner or in similar settings.
However, not all exchanges of information among employers will be unlawful. The DOJ outlines the "safety zone" under which the sharing of information may be lawful as one where:
- A third party — such as a trade association, government agency, consultant, academic institution or a purchaser — manages the exchange
- The exchange involves information that is relatively old (according to some 1996 Guidance relating to the healthcare industry, the DOJ and FTC described "old" as being more than three months old)
- The information is aggregated and displayed to protect the identity of the underlying sources
- Enough sources are aggregated to prevent competitors from linking particular data to an individual source (the same 1996 Guidance required at least five sources with no individual provider's data representing more than 25 percent of the sample)
If an HR or other professional is uncertain about whether certain specific activities may run afoul of the antitrust laws, the DOJ and FTC have set up a business review process that enables the person to learn how the government would respond under certain circumstances. Additionally, the agencies will also provide advisory opinions for future conduct upon request. If appropriate under certain circumstances, it may be wise to consider utilizing such services before engaging in any activities that may not comply with the antitrust laws.
Hopefully, this article alerts HR professionals to the real risks of entering into wage-fixing, anti-poaching agreements and provides some practical limits on the sharing of specific, current compensation and benefits related information.
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