In a "seller’s market" for talented employees, many businesses are looking at every available option as they fight to recruit and retain workers. Because of a lesser‑known application of federal antitrust laws, however, an unwitting employer could end up with significant legal exposure by making agreements with other organizations about hiring practices.
Antitrust issues are often associated with monopolies or price‑fixing schemes. Corporate mergers also draw antitrust scrutiny, as a lower number of providers can narrow the supply of goods or services and drive up prices.
Those are not the only contexts in which antitrust law applies, though. The U.S. Supreme Court ruled over 90 years ago that certain hiring practices can constitute unlawful restraints of trade. Agreements among employers not to pursue or "poach" employees away from their current jobs can restrict the opportunities that might otherwise be available to those individuals. Because many people use other job offers to negotiate for higher wages, no-hire or no‑solicitation agreements among employers can drive down the compensation and advancement opportunities of the individuals who are affected.
This longstanding legal principle took on a higher profile in 2010, when the federal Department of Justice challenged agreements among technology companies not to cold‑call each other’s employees about job openings. In 2015, Adobe, Apple, Google, and Intel paid $415 million to settle class action claims that individuals filed against those companies over the same agreements.
The following year, the Federal Trade Commission and the Department of Justice (DOJ) jointly issued Antitrust Guidance for Human Resource Professionals. That 2016 publication announced an aggressive new policy under which the DOJ will initiate criminal investigations over restrictive agreements between employers that are not part of a larger collaboration effort. In addition to restrictions on recruiting and hiring, this includes agreements about wages. As that Guidance document stated, "the DOJ will criminally investigate allegations that employers have agreed among themselves on employee compensation or not to solicit or hire each others’ employees."
In early 2018, a high-ranking DOJ official reaffirmed the agency’s intent to pursue criminal antitrust charges over agreements not to recruit or hire employees from other businesses. The same official indicated that the DOJ expects to initiate “multiple” enforcement actions in the coming months regarding this type of agreement.
Restrictions among employers not to recruit or hire employees from one another may be permissible if they are in conjunction with a joint venture or a business collaboration. Any restrictions that are part of a larger transaction should be carefully tailored to minimize antitrust risk. To withstand scrutiny as part of a larger transaction, the restriction must be reasonably necessary for the underlying transaction and narrowly tailored both in scope and duration. Similarly, non-competition agreements between individuals and their employers generally do not violate antitrust law.
Given the DOJ’s stated enforcement position, employers face increasing risk if they agree with other organizations to limit their recruiting efforts in any way. Even exchanges of information about terms and conditions of employment among different entities can result in civil antitrust liability if the effect may be to lower employees’ mobility or leverage in negotiations. Companies should also provide training to human resources and management employees who are involved in employee recruitment and any wage information exchange so they are aware of these pitfalls. If antitrust law is not part of your organization’s compliance efforts, it should be.