No-Poaching Pacts Could Land HR Professionals in Jail

Stay informed and ready to meet both everyday challenges and long-term planning and policy-making goals, with focused news, practical information, and strategic insights on all HR-related developments.

 

By Gayle Cinquegrani

Nov. 4 — Human resources professionals could face criminal prosecution if they collude with competitors to cap employee pay or avoid recruiting each other's employees.

And they probably don’t realize it, employment and antitrust attorneys say.

“The Justice Department intends to criminally investigate naked no-poaching or wage-fixing agreements,” the Federal Trade Commission and the Justice Department’s Antitrust Division told human resource professionals in a news release announcing guidance issued by the agencies Oct. 20.

“Antitrust violations in the employment arena can greatly harm employees and impact earnings over the course of their entire careers,” the Antitrust Division’s acting assistant attorney general, Renate Hesse, said in the news release. “HR professionals need to understand that these violations can lead to severe consequences, including criminal prosecution.” Even “agreements that do not constitute criminal violations may still lead to civil liability,” she said.

Antitrust violations pose a risk for HR professionals. “Most HR people are probably unaware that by their action in recruiting or not recruiting, they could be violating these very high-level laws that could carry criminal penalties,” Philip Berkowitz, a shareholder at employment law firm Littler Mendelson in New York, told Bloomberg BNA Nov. 2. “It’s no longer just” the Equal Employment Opportunity Commission “that the HR people need to worry about.”

“When you think about antitrust compliance, what your HR department is doing is not at the top of the list,” Kail Jethmalani, an antitrust associate at Axinn, Veltrop & Harkrider LLP in New York, told Bloomberg BNA Nov. 3. The “new development” for HR professionals is the potential for criminal enforcement by the Justice Department, he said.

HR Violators Could Face Prison

An HR professional who enters into an agreement to fix wages could end up in prison, Jethmalani said. “It is a real threat. It is something to be wary of.”

The possibility may surprise HR professionals because the DOJ “has not yet criminally prosecuted an HR antitrust violation,” Jethmalani said. The DOJ has brought “some high-profile” civil cases since 2010, including ones involving several Silicon Valley technology companies that allegedly agreed not to cold call each other’s employees with job offers. However, “this is the first that DOJ has announced its position that it will be bringing criminal prosecutions against individuals,” Jethmalani said.

“Antitrust and employment didn’t really intersect until” the Silicon Valley cases in 2010, Peter Altieri told Bloomberg BNA Nov. 4. Altieri is a member of Epstein Becker Green in New York who specializes in antitrust and trade regulation and employment litigation. Since then, many states have considered adopting or expanding legislation regarding noncompetition agreements affecting employees, he said.

As for no-poaching and wage-setting agreements among HR professionals, Altieri said, “It doesn’t matter if there is a wink or handshake. It’s unlawful activity.”

Although jail time would be possible, it’s unlikely that many HR people would be sentenced to prison, he said.

Nevertheless, companies should incorporate information from these guidelines into their HR policies and training, he said. “You want to add this to the list of risk and compliance training that you give to your staff,” he said.

The agency guidance emphasized the important role of HR personnel. “HR professionals often are in the best position to ensure that their companies’ hiring practices comply with the antitrust laws” because they can “implement safeguards to prevent inappropriate discussions or agreements with other firms seeking to hire the same employees,” it said.

Rules Apply to Informal Agreements

“From an antitrust perspective, firms that compete to hire or retain employees are competitors in the employment marketplace,” the guidance said. “Agreements among employers not to recruit certain employees or not to compete on terms of compensation are illegal,” regardless of “whether the agreement is informal or formal, written or unwritten, spoken or unspoken.”

Competition among employers helps employees by increasing wages and fringe benefits and helps consumers because a more competitive workforce results in better goods and services, the guidance said.

Even nonprofit organizations can be held criminally or civilly liable for antitrust law violations, the agencies said. In addition, using a third-party intermediary such as a professional or trade association doesn’t insulate an employer from liability, they said.

“Going forward, the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements,” the guidance said. “Depending on the facts of the case, the DOJ could bring a criminal prosecution against individuals, the company, or both. And both federal antitrust agencies could bring civil enforcement actions,” the guidance warned. In addition, an employee could sue for triple the amount of damages actually incurred.

The guidance acknowledged that a company “may need to obtain limited competitively sensitive information” from a competitor that it is considering merging with or buying. “Such information gathering may be lawful if it is in connection with a legitimate merger or acquisition proposal.”

For companies unsure about whether their actions may be a violation, the guidance noted the FTC issues advisory opinions and the DOJ’s Antitrust Division has a business review process.

Leniency Policies Exist

The Antitrust Division has leniency policies for businesses or individuals under which criminal charges aren’t brought against an entity or person that first reports an antitrust offense and cooperates with the investigation.

The guidance urged HR professionals who have information about possible antitrust violations to contact the FTC’s Bureau of Competition or the DOJ’s Antitrust Division Citizen Complaint Center.

The FTC and the DOJ said they issued the guidance to comply with an April 15 executive order calling on federal agencies to use their authority to “protect American consumers and workers and encourage competition in the U.S. economy.”

A Justice Department spokesman declined Nov. 4 to comment beyond a joint agency news release, and an FTC spokesman didn’t respond to several messages left by Bloomberg BNA.

To contact the reporter on this story: Gayle Cinquegrani in Washington at gcinquegrani@bna.com

To contact the editor responsible for this story: Tony Harris in Washington at tharris@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.