Antitrust and Human Resources: What You Need To Know

In January 2018, Makan Delrahim, the Assistant Attorney General for the Antitrust
Division, said that the Department Of Justice (“DOJ”) had been very active in reviewing
potential antitrust violations resulting from agreements among employers not to compete for
workers. (We previously reported on this announcement here.) He said that he was “shocked” at
how many there were and that in the coming months there would be announcements of
enforcement actions. He also mentioned that if the conduct occurred or continued after issuance
of the October 2016 joint DOJ and Federal Trade Commission (“FTC”) Antitrust Guidance for
Human Resource Professionals (the “Joint Guidance”), the DOJ may treat those agreements as
criminal.

On April 3, 2018, the first of these announcements was made. See “Justice Department
Requires Knorr and Wabtec to Terminate Unlawful Agreements Not to Compete for Employees,”
available at (“News Release”). The DOJ advised that it filed a complaint in which it alleged that
Knorr-Bremse AG (“Knorr”), Westinghouse Air Brake Technologies Corporation (“Wabtec”)
and Faiveley Transport S.A., before it was acquired by Wabtec, entered into agreements not to
compete for each other’s employees (“no-poach” agreements). The DOJ contends that these
were naked agreements – i.e., not reasonably necessary for a separate, legitimate business
transaction or collaboration – and amounted to per se violations of Section 1 of the Sherman Act.
With the Complaint DOJ also filed a Competitive Impact Statement; Explanation of Consent
Decree; and Stipulation and Proposed Final Judgment. (See News Release.)

As noted, Mr. Delrahim stated that there were a number of these investigations ongoing,
and in the News Release said that this Complaint was “part of a broader investigation by the
Antitrust Division into naked agreements not to compete for employees.” So more of these
announcements can be expected, and some may be announcements of criminal prosecutions.

Many Human Resources Professionals Are Unaware That the Antitrust Laws Apply to
the Employment Market

Often some business executives and human resource professionals are unaware that the
antitrust laws apply to the workplace. Executives who would never consider discussing prices
with their competitors are unaware that discussing wages or salaries could have antitrust risks.
Similarly, employee covenants not to compete are commonplace and many executives have them
in their own employment contracts. So unless they have received specific training, an executive
may be unaware of the antitrust risks associated with no-poaching agreements. And up until
recently even the most elaborate and detailed antitrust compliance policies that strictly prohibited
discussing prices rarely addressed the exchange of wage and salary information or prohibited no-
poaching agreements.

But the DOJ and FTC have now greatly ratcheted up their enforcement efforts with
respect to alleged restraints in the employment market. And with the DOJ and FTC taking the
position that naked no-poaching agreements are per se unlawful and subject to criminal
prosecution, the antitrust risks have been greatly increased — not to mention the costly class
actions that are likely to follow any settlement with the DOJ.

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 Thus, employers can no longer ignore the risk. If they have not already done so,
employers should consider:

1. Conducting an internal investigation to determine whether the company is engaging in

the informal gathering of wage, salary or benefit information; or whether it has entered into any
no-poach agreements. The investigation should be conducted or closely supervised by counsel
with steps taken to preserve the attorney-client privilege. Also, if it is discovered that the
company has engaged in any “naked” wage-fixing or no-poaching agreements on or after
October 25, 2016, then criminal counsel should be consulted as DOJ may treat such conduct as
criminal.

2. Implementing an antitrust compliance program that ensures that all management and
human resources personnel are aware that they cannot: (1) engage in a naked wage, salary or
benefits-fixing agreement with any other unrelated employer; (2) engage in the gathering or
exchange of wage, salary or benefits information without full compliance with the Joint
Guidance; or (3) enter into any no-poach agreement without prior approval of counsel. Such
individuals should, on an annual basis, be required to acknowledge in writing that they are aware
of these prohibitions. Also, anyone hired or transferred into any of these positions should be
made aware of these prohibitions at the time they are hired or transferred. These employees
should also be advised that the DOJ is likely to treat naked wage/salary/benefit-fixing and no-
poaching agreements as criminal and employees could be sentenced to prison for engaging in
such conduct.

Karla Grossenbacher is the Vice President for Legislative Affairs on the NOVA SHRM Board,
and chairs the labor and employment practice in the Washington, D.C. office of Seyfarth Shaw
LLP. Karla Grossenbacher appreciates the efforts of Gerald Maatman, Timothy Haley and
Ashley Laken in preparing this article. If you have any questions about the information in this
article, you may e-mail Karla at kgrossenbacher@seyfarth.com or call her at 202-828-3556.

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