In July of 2021, President Biden issued Executive Order 14036, which affirmed the executive branch’s policy to enforce antitrust laws. Two aspects of the Order relate directly to employment law:
- The direction that the Department of Justice and the Federal Trade Commission (FTC) should consider revisions to the Antitrust Guidance for Human Resource Professionals issued in October of 2016; and
- The suggestion that the FTC should consider rulemaking to curtail the unfair use of non-compete clauses.
While neither of these events has occurred yet, they are on the horizon and should serve as a reminder for Iowa employers and HR professionals that they need to be aware of antitrust laws or face civil or criminal consequences.
No-Poaching Agreements - Restraint of Trade
Current Department of Justice and FTC Guidelines state that agreements among competing employers not to recruit the other’s employees are illegal. While the government has taken civil action against this type of no-poaching agreement in the past, there have been recent criminal indictments for participation in agreements not to hire a competitor’s employees. The Department of Justice considers this type of agreement between competitors to be a restraint of trade, and it is beginning to use the threat of criminal penalties to curtail such agreements.
It is unclear whether courts will apply a strict rule of per se illegality or whether a rule of reason will be applied, and that decision likely will depend on the nature of the relationship between the parties to the agreement. For example, agreements between a franchisor and franchisee may be subject to the less stringent standard of rule of reason. But regardless of the standard applied, the possibility of criminal sanctions is daunting.
Wage Suppression
The Department of Justice has also taken criminal action against employers who are alleged to have colluded with competitors to suppress wages. In November of 2021, a Texas court allowed a criminal indictment to proceed when employers were alleged to have acted in concert to suppress wages. The defendants argued that their due process rights were violated because criminal law had not been previously applied to this type of activity. The court rejected that argument while expressing some sympathy to the defendants for being among the first to face this type of charge.
While naked agreements not to compete with respect to wages or to set wages for specific jobs are prohibited, there are some instances when sharing information with competitors may be allowed. The sharing of wage information among competitors may be allowed if the wage information is:
- Collected by a neutral third party
- Old (i.e., not current)
- Made available to others in an aggregated form and if there are enough participants that the information provided cannot be linked to a specific participant
For example, trade associations may be able to properly assemble or provide this information.
Bottom Line
It is important that executives and human resource professionals are aware of the emerging strategy by the Department of Justice to use antitrust laws, not only civil but criminal as well, to root out collusion in labor markets. Iowa businesses should consult an employment lawyer if they have any questions about proposed actions in connection with competitors.
