December 09, 2016

Federal Agencies: Personnel-Related Agreements with Competitors Likely Violate Anti-Trust Law

A recent “Guidance for HR Professionals” jointly issued by the Department of Justice (DOJ) and the Federal Trade Commission (FTC) highlights that arrangements between competing businesses designed to limit competition in hiring or reduce personnel costs likely are unlawful.

Federal anti-trust laws prohibit competitors from expressly or implicitly agreeing not to compete with one another. The typical anti-trust violation occurs when competitors agree to fix prices for their products, thereby maximizing profits for both companies. However, anti-trust law also prohibits competitors from colluding to reduce their costs.

The Guidance illustrates that anti-trust principles apply to agreements between competitors designed to minimize personnel-related expenses or risks. Examples of such unlawful arrangements include an agreement among competing employers to limit or fix the terms of employment for potential hires; an agreement to fix wages at certain levels; and agreements not to hire each other’s employees (“no-poaching agreements”). An unlawful agreement need not be reduced to writing and can be informal, unwritten or even unspoken.

In furtherance of its position that anti-trust violations may occur in the human resources context, the DOJ has filed civil employment-related enforcement actions against:

  • A hospital and health care association that, acting on behalf of most hospitals in its state, set a uniform bill rate schedule by which the hospitals would pay temporary and per diem nurses
  • Technology companies that entered into no-poaching agreements with one another, including agreements not to cold call each other’s employees and agreements that limited the circumstances under which a company could hire its competitor’s employees
  • Nursing homes that agreed to boycott temporary nurses’ registries in order to eliminate competition among the nursing homes for the purchase of nursing services
  • Fashion industry organizations who attempted to collude in reducing the fees and other terms of compensation for models

The Guidance also suggests that companies may be found to have entered into improper, implicit agreements by sharing sensitive information with competitors about the terms and conditions of employment for its employees. For example, the DOJ filed a lawsuit against a society of health care industry human resources professionals for conspiring to exchange nonpublic prospective and current wage information about registered nurses. The exchange allegedly caused the society’s member hospitals to match each other’s wages, keeping the pay of registered nurses in certain areas of the state artificially low.

The Guidance does not specifically address whether it would be improper for competitors seeking to resolve a noncompete lawsuit to include a provision whereby one of the parties to the agreement commits not to hire employees of the other party for a certain period of time. While settlement agreements are not immune from anti-trust scrutiny, the DOJ previously has acknowledged that non-hire agreements that are ancillary to legitimate, pro-competitive collaborations are not per se unlawful. One could argue that a one-way no-hire arrangement is a reasonable, lawful remedy in the context of a settlement of a legal dispute. However, this approach is not without risk.

Human resources professionals and their employers are well-advised to avoid any discussions, agreements or understandings with competitor companies that could be construed as collusion aimed at jointly reducing personnel costs. For more information, see the “Antitrust Guidance for Human Resource Professionals” or “Antitrust Red Flags for Employment Pracrtices.”

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