Antitrust prohibitions in HR?

by Michael Haberman on November 17, 2016 · 0 comments


The Department of Justice prohibits HR from fixing wages or having no poaching agreements.

The Department of Justice prohibits HR from fixing wages or having no poaching agreements.

We all have heard of the prohibition on price fixing in business that is monitored by the Department of Justice and the Federal Trade Commission. Businesses are prohibited from discussing and colluding on prices of goods and services. In the US price fixing can be prosecuted as a criminal act under the Sherman Antitrust Act. This begs the question of how can HR be accused of price fixing in the first place?

Price fixing in HR

Since HR is not selling anything how can it fix prices? It is related to the definition of price fixing. The DOJ and the FTC consider wages to be akin to prices. They say that companies cannot collude to fix the price of wages, which in their book is the same thing as prices. They say someone is engaging in this if he or she “agrees with individual(s) at another company about employee salary or other terms of compensation, either at a specific level or within a range (so-called wage-fixing agreements.)” (An interesting historical fact is that companies argued the same thing early in the union movement in this country, which allowed them to successfully stop union activity by jailing union leaders on antitrust activities, until the Supreme Court said that was an incorrect application of the Sherman Antitrust Act.)

Poaching

The DOJ also defines agreements to not “poach” a competitor’s employees as violating the antitrust laws. They have successfully prosecuted companies in civil actions for having such agreements. They said:

In the past few years, the DOJ brought three civil enforcement actions against technology companies (eBay and Intuit, Lucasfilm and Pixar, and Adobe, Apple, Google, Intel, Intuit, and Pixar) that entered into “no poach” agreements with competitors. In all three cases, the competitors agreed not to cold call each other’s employees. In two cases, at least one company also agreed to limit its hiring of employees who currently worked at a competitor.”

I have heard in the past of companies agreeing to leave each other’s employees alone. It happened in one industry I was working in and I am sure they are common in industries where the talent is fairly sparse and companies see the quickest way to success as poaching employees. Unfortunately the DOJ does not like this and they are giving a warning to employers when they announced:

“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. Accordingly, the DOJ will criminally investigate allegations that employers have agreed among themselves on employee compensation or not to solicit or hire each others’ employees. And if that investigation uncovers a naked wage-fixing or nopoaching agreement, the DOJ may, in the exercise of its prosecutorial discretion, bring criminal, felony charges against the culpable participants in the agreement, including both individuals and companies.”

Solutions

The DOJ provides guidance to employer HR groups on how to handle situations that could be perceived as wage fixing or no-poaching agreements in their booklet ANTITRUST GUIDANCE FOR HUMAN RESOURCE PROFESSIONALS. It gives a number of examples of what could be considered to be illegal activity. So try not to collude with your colleagues at competing companies. That is bound to get you in trouble. Train recruiters and other HR personnel to be careful about sharing information at conferences and SHRM dinners.

We will have to see if this stance changes with the new administration, but I would not count on it.


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