Price fixing, bid rigging, and market allocation are often considered the "unholy trinity" of antitrust investigations, and any of these three activities can quickly earn your business negative press and harsh financial penalties. However, both the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) cast a much wider net when investigating collusion or other anti-competitive arrangements.
In particular, these organizations have begun focusing on agreements between businesses that artificially limit or influence wages and other employee compensation packages. And these "benefits" cover more than traditional health insurance or paid time off, including:
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In a guidance document jointly produced by the DOJ and FTC, the agencies make it clear that: "Going forward, the DOJ intends to proceed criminally against naked wagefixing 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 criminally investigated and prosecuted as hardcore cartel conduct."
Of course, several high-profile businesses -- the Walt Disney Company, Pixar, and Lucasfilm -- have already run afoul of this directive, settling an antitrust class action suit earlier this year to the tune of $100 million. At issue, the trio of companies (along with several others named in the original suit) were accused of establishing non-poaching agreements regarding animation workers, avoiding cold calling of competitor employees, and artificially restricting when employees could receive counteroffers when considering switching employers.
Considering that a verbal agreement is equally as unlawful as a well-documented no poaching policy, your business should quickly report any proposed collusion or inappropriate offer. As the DOJ and FTC explain in their guidance document: "Even if an individual does not agree orally or in writing to limit employee compensation or recruiting, other circumstances – such as evidence of discussions and parallel behavior – may lead to an inference that the individual has agreed to do so."
As an added incentive, the DOJ has in place a Corporate Leniency Policy that offers leniency -- and frequently immunity -- to the first qualifying organization to report an antitrust offense and cooperate with the subsequent investigation.
Your business is welcome to make hiring decisions that make sense for your company, and one of those choices might be to avoid hiring from competing firms in order to protect trade secrets (or for any other reason). The legal trouble arises once these hiring choices are shared and coordinated with outside organizations.
Your business should consider its hiring and compensation strategies as competitive information, and only release this data on a limited basis and only after discussing with legal counsel.
As the DOJ clearly states: "Any company, acting on its own, may typically make decisions regarding hiring, soliciting, or recruiting employees. But the company and its employees should take care not to communicate the company’s policies to other companies competing to hire the same types of employees, nor ask another company to go along."
Of course, there will be times when your business will need to share its compensation data, such as for a benchmarking exercise or when engaged in due diligence as part of a merger or acquisition process. But even in these "legitimate" instances, caution should be exercised.
Limit who can view the data, and consider operating through a third party to manage the record exchange. There are also several strategies that you can use to mask the information such as providing historical or aggregated data.
Legislation will change as will executive direction for enforcement agencies -- as reflected by this most recent guidance update, and keeping abreast of these changes can prove challenging. If a question or issue arises regarding what is or is not appropriate, check with industry experts or even reach out to the FTC directly for an advisory opinion.
Consider working with outside legal counsel to routinely review and update your existing antitrust policies. Also, implement regular training for human resources staff and key decision makers to keep everyone in the organization informed and on the same page.
By being proactive in how you manage and share employee compensation data, your business will be better able to avoid potential antitrust litigation or other legal infractions.
To learn how we can help you avoid the hint of scandal or possible criminal investigation, check out our Global Antitrust & Fair Competition courses and request a demo today.
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