DOJ, FTC warn HR professionals on ‘naked’ wage fixing, no-poach pacts

October 29, 2016

employment-application-black-no-credit-istock-photoThe Justice Department has announced it will criminally investigate companies that enter into agreements to fix employee compensation or pledge not to poach each other’s employees.

The DOJ’s Antitrust Division and the Federal Trade Commission have issued joint guidance to help human resources professionals and others involved in hiring and compensation decisions avoid antitrust scrutiny by the agencies.

According to the agencies’ Oct. 20 joint statement announcing the guidance, “naked” wage-fixing and no-poaching agreements “eliminate competition in the same irredeemable way as agreements to fix the prices of goods or allocate customers which have traditionally been criminally investigated and prosecuted as hardcore cartel conduct.”

The agencies cautioned that they might bring actions for civil liability for agreements that do not constitute criminal conduct.

In the 11-page guidance, the agencies provide HR professionals with information to help prevent violations of antitrust laws and report potentially unlawful activity.

The guidance also explains how competing businesses can run afoul of antitrust laws by sharing, directly or through third parties, information on employee compensation and other employment terms.

Notably, the guidance warns that “from an antitrust perspective, firms that compete to hire or retain employees are competitors in the employment marketplace, regardless of whether the firms make the same products or compete to provide the same services.”

According to the statement, the DOJ and FTC have also issued a quick reference card encapsulating the information provided in the guidance.

Private anti-poaching litigation

The agencies’ effort to bring more scrutiny to no-poaching and wage-fixing agreements comes at a time when Silicon Valley employers are facing or have recently resolved private suits accusing them of colluding to hold down workers’ wages and impede their job mobility.

In September 2015 U.S. District Judge Lucy Koh of the Northern District of California gave final approval to a $415 million class-action settlement of claims that Adobe Systems Inc., Apple Inc., Google Inc. and Intel Corp. agreed not to compete for each other’s employees. In re High-Tech Emp. Antitrust Litig., No. 11-cv-3541, motion for final approval granted (N.D. Cal. Sept. 9, 2015).

The plaintiffs in class-action litigation claiming the major animation studios entered into no-poaching pacts have recently asked for Judge Koh’s preliminary approval of a proposed $50 million cash settlement with DreamWorks Animation SKG Inc., In re Animation Workers Antitrust Litigation, No. 14-cv-4062, motion for preliminary approval filed (N.D. Cal. Oct. 17, 2016).

They have also asked for final approval of a $13 million settlement with Sony Pictures Imageworks Inc. and Sony Pictures Animation Inc. and a $5.95 million settlement with Blue Sky Studios Inc., In re Animation Workers Antitrust Litigation, No. 14-cv-4062, motion for final approval filed (N.D. Cal. Oct. 13, 2016).

So far, three separate class-action suits have been filed this fall claiming LG Corp. and Samsung Group are artificially suppressing employees’ compensation by entering into agreements not to poach each other’s workers.

FTC News Release, FTC and DOJ Release Guidance for Human Resource Professionals on How Antitrust Law Applies to Employee Hiring and Compensation, 2016 WL 6122917 (Oct. 20, 2016).