New Rules Regarding Wage Fixing and No-Poaching Agreements

After the Department of Justice (DOJ) and the Federal Trade Commission (FTC) released new Guidance for Human Resource professionals related to agreements between competitors, employers would be wise to tread very carefully.  The Guidance, issued in October warns that those agreements as they relate to hiring, wage compensation and no-poaching agreements could be construed as price fixing and could be criminally investigated by the agencies.

The Guidance announced that the Antitrust Agencies will view standalone or “naked” wage-fixing, no-poaching, non-compete, and anti-competitive agreements as per se illegal, regardless of whether they have an actual anti-competitive effect.

The DOJ has said that it intends to investigate and wherever appropriate bring criminal charges against companies and individuals that it believes are guilty of violating anti-trust laws by entering into those agreements. This means that the risk of anti-trust violations being cited against companies that enter into such agreements when doing collaborative works – or even in the case of legitimate mergers – have now been increased.

Such agreements in today’s marketplace were viewed by some companies as being necessary in order to prevent an exodus of groups of employees leaving to work for a competitor. Many workers have been required to sign non-compete clauses and non-disclosure agreements when hired by one firm as a protective measure and in order to prevent trade secrets from going to a competitor.

The Guidance clearly states that even in cases where two competitors are engaged in a business collaboration or joint venture or proposed merger or acquisition, they may still be subject to scrutiny, even though the sharing of information in those cases are not per se illegal. Access to any information that may be considered sensitive in terms of compensation of workers is permissible in order to perform due diligence; however, this information should be as restricted as much as possible and that the parties should ensure that no subsequent changes in compensation result from having access to this information.

Even if there is no evidence that there was an express oral or written agreement to fix wages or information sharing that may lead to an inference of wage-fixing, an investigation and charges may still result. Companies are advised in such mergers and acquisitions or joint venture agreements to make certain that the scope is not broader than necessary to the legitimate needs to the finalization of the business deal. Even though such agreements in the past may have not raised scrutiny in the past, The Guidance makes it clear that firms should err on the side of caution rather than face scrutiny by Antitrust Agencies.

Making sure that your company follows all employment and anti-trust standards that are set forth by the Department of Justice, the Federal Trade Commission and all other federal, state, county and municipal laws is important. It can also be confusing and a real challenge even for Human Resource professionals to keep track of.

At NetPEO, we understand employment and anti-trust laws. Along with our professional partners, we are here to help you with all of your personnel and human resource management needs.  We offer a wide range of services that cover all areas of human resources management, payroll services, management of employee benefits, liability management for employers, brokerage services, and employee leasing as well.

Contact us today to discuss your company’s current needs and to schedule a free assessment.