In 2016, the Department of Justice (DOJ) Antitrust Division and the Federal Trade Commission (FTC) issued joint Antitrust Guidance to Human Resource (HR) Professionals (HR Guidelines) and Red Flags for Employment Practices. The HR Guidelines make clear that companies that compete to hire or retain employees are competitors in the employment market. Even companies that do not compete against each other in a product or service market will still be deemed competitors in the labor market if they compete with respect to hiring or retaining employees. Agreements between competing employers are illegal if they relate to recruiting, hiring, wages, salaries, benefits, or other terms of employment.
The DOJ also vowed in the HR Guidelines to proceed criminally against no-poaching and wage-fixing agreements under the Sherman Act. The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual. Violations of the Sherman Act are also punishable by up to 10 years of imprisonment.
On December 10, 2020, the DOJ obtained the first of two indictments involving employment practices since the DOJ/FTC released their 2016 HR Guidelines. A federal grand jury returned a two-count indictment charging the former owner of a health care staffing company with conspiring with a competing staffing agency to suppress wages paid to physical therapists and physical therapist assistants in violation of Section 1 of the Sherman Act. Numerous text messages exchanged between the owner and other staffing agencies related to wage rates were cited in the indictment. The indictment also alleges that the owner obstructed the FTC’s investigation involving the same conduct.
A few weeks later, on January 7, 2021, the DOJ announced criminal charges involving a no-poach agreement against an outpatient medical center. The two-count indictment charges an outpatient medical care center with agreeing with other health care companies not to solicit senior-level employees dating back to 2010. Following the indictment, the Assistant Attorney General Makan Delrahim of the DOJ’s Antitrust Division stated that the DOJ “will ensure that companies who illegally deprive employees of competitive opportunities are not immune from our antitrust laws.” In addition to the criminal action, the outpatient medical care center is also facing a civil class action on behalf of affected employees regarding the same allegations in the United States District Court for the Northern District of Illinois. See Roe v. Surgical Care Affiliates, LLC, et al, No. 21-cv-00305 (N.D. Ill. Jan. 19, 2021).
These criminal prosecutions follow multiple statements by the DOJ stressing its commitment to protect labor markets from anticompetitive conduct. The DOJ has also filed statements of interest in civil no-poach and wage-fixing cases. Antitrust enforcement in the labor markets is likely to continue as an area of focus with the new administration. President Biden has called for the elimination of “non-compete clauses and no-poaching agreements that hinder the ability of employees to seek higher wages, better benefits, and working conditions by changing employers.”
Companies and their employees should be mindful of the DOJ’s activity and interest in the employment area and examine their antitrust compliance programs. The following conduct could potentially trigger antitrust risk for companies:
- Discussing with another company (including during social events or other non-professional settings) about employee salaries, employee benefits, or other terms of compensation;
- Discussing with another company (including, but not limited to, contractors, subcontractors, vendors, staffing companies, or consulting companies) an agreement to refuse to solicit or hire the other company’s employees;
- Expressing to competitors that they should not compete too aggressively for employees or discussing an agreement to refuse to solicit or hire the other company’s employees;
- Exchanging information about employee compensation or terms of employment with another company;
- Participating in a meeting, such as a trade association or other industry meeting, where recruiting, hiring, wages, salaries, benefits, or other terms of employment are discussed; or
- Receiving documents that contain another company’s internal data about employee compensation.
Wyche provides antitrust compliance counseling and representation in litigation. Wyche also provides employment advice and counseling to clients before problems emerge, helping to develop policies and procedures that limit workplace disputes and mitigate exposure to costly litigation.