United States: DOJ And FTC Set Possible Criminal Liability Trap For HR Professionals

Last Updated: November 2 2016
Article by James J. Tierney and Alex Okuliar

In an October surprise, the DOJ and FTC (collectively, the "Agencies") released guidance for HR professionals on the application of the antitrust laws to employee hiring and compensation.  The Agencies' October 20, 2016 release, Antitrust Guidance for Human Resource Professionals, announced that "naked" agreements among employers not to poach each other's employees and to fix wages and other terms of employment are per se illegal.  Critically, for the first time, the Agencies warn that such agreements could result in criminal prosecution against individual HR professionals, other company executives, as well as the company.  This Guidance, coupled with repeated requests to approach the Agencies to report such agreements, signals a significant shift in enforcement focus for the Agencies, including a further move to individual prosecutions, particularly when taken together with last year's DOJ Yates Memorandum calling for more emphasis on individual executive liability.

While the Agencies have put HR professionals on notice regarding their enforcement intentions, they have also set a trap for unwary HR professionals who fail to successfully navigate the ambiguous line between lawful and unlawful hiring restrictions.

Look Back and Look Forward

Under the new Guidance, HR professionals now have a duty both to look backward to ferret out any existing anticompetitive conduct and forward to implement compliance programs to ward off future problems. If the HR professional discovers the company has been a member of a naked wage-fixing or no poach agreement, the Agencies urge the company to report the agreement to the DOJ under its Corporate Leniency Policy"–which provides that the first qualifying corporation to report the offense will not be criminally charged.  Looking forward, HR professionals should implement effective compliance programs (if they have not already done so) designed to prevent employees from entering into anticompetitive hiring agreements.

Agencies: Competition to Hire and Pay Employees More Is Good for Consumers

According to the Agencies, competition among employers to hire and retain employees "gives consumers the benefits of lower prices, higher quality products and services, more choices, and greater innovation." Employees also benefit through "higher wages, better benefits, or other terms of employment."  Consumers and employees are denied these benefits when employers agree:  (1) to fix employee salaries or other terms of compensation, either at a specific level or within a range ("wage-fixing" agreements), or (2) not to cold call, solicit or hire employees (collectively, "no poach" agreements).  Additionally, merely inviting another employer to enter into an illegal hiring agreement may be an antitrust or unfair competition violation"–an "invitation to collude"–even if the invitation does not result in an agreement.1

The Guidance Addresses Only Joint Conduct Among Competitors in Labor Markets

In the employment context, Section 1 of the Sherman Act and the Agencies' Guidance is limited to agreements among competitors in the labor market. Labor is an input to a company's downstream products or services.  The focus of the Agencies' concern is on competition for the services of particular employees and the effect of unlawful wage-fixing and no poach agreements on employees' mobility and compensation.  In the labor market context, employers may compete for the same kinds of workers whether or not they compete to provide the same goods or services.  For example, two technology companies may not offer the same product, but they are direct competitors for skilled engineers and scientists.

Companies are free to unilaterally adopt policies and make decisions regarding hiring, salaries and benefits, soliciting employees, and recruiting employees. For example, a company is free to decide on its own not to solicit another company's employees for fear of starting a "poaching" war.  No antitrust liability attaches to such a policy, as long as it is adopted unilaterally.  That is true even if the other company unilaterally adopts the same policy.  A company, however, should take care that its policy is not communicated to its competitors in the labor market or suggest that other competitors go along with their policies.  Such communications could lead to a tacit or express agreement.

Under Section 1 of the Sherman Act, certain agreements such as price fixing and customer allocations are so plainly anticompetitive that courts conclusively presume they are unlawful without any inquiry into the precise harm the agreement may have caused. Such agreements are referred to as "naked" agreements and are judged illegal per se.  The Guidance makes clear that the Agencies view some wage-fixing and no poach agreements as naked restraints that should be deemed illegal per se.  Because no inquiry into competitive effects is necessary, the Guidance rejects arguments that wage-fixing and no poach agreements may be justified, for example, by a desire to reduce costs, become more efficient, or to provide more employment opportunities.  Under certain circumstances, and in the exercise of its prosecutorial discretion, DOJ may criminally prosecute per se wage-fixing and no poach agreement.

Not all wage-fixing and no poach agreements are condemned as per se illegal and subject to possible criminal prosecution.  Wage-fixing and no poach agreements are not per se illegal if the agreement is ancillary to a legitimate procompetitive employer collaboration and the hiring restraint is "reasonably necessary" to achieve the procompetitive benefits of the collaboration.  HR professionals should proceed with particular caution before entering into wage-fixing agreements even where the agreement is ancillary to a legitimate employer collaboration.  Wage-fixing agreements will raise a red flag with the Agencies, are rarely necessary for the success of a legitimate employer collaboration, and can be considered a serious violation of the antitrust laws.

No poach agreements are more common and often are necessary for the success of a legitimate employer collaboration. For example, often companies will dedicate employees to work on a project that benefits both of them.  In that situation, limitations on soliciting each other's employees may pass muster under the antitrust laws.  Similarly, if a company hires temporary employees from an agency, a limited non-solicitation agreement may be lawful.  These sorts of "ancillary restraints" are not per se unlawful, but rather are evaluated under the rule of reason which balances a restraint's procompetitive benefits against its anticompetitive effects.  To maximize the odds of being considered a lawful ancillary restraint, the restraint should be tied to a specific employer collaboration and be tailored to the scope of the collaboration.

There Is Little Support for the Agencies' Radical Shift in Policy

An agreement among labor market competitors to fix wages can be viewed as a potential per se violation.  Not so with no poach agreements.  In recent years, courts have been reluctant to extend the application of the per se rule beyond hardcore price-fixing and customer allocation agreements.  And the DOJ generally pursues per se agreements as a civil violation, not a criminal violation, where there is uncertainty whether the courts will view the agreement as a per se violation.  No court has every held that a no poach agreement is a per se violation of the Sherman Act.   All courts that have decided the issue have applied a rule of reason analysis.  Acknowledging the uncertain state of the law, the Agencies cite to only U.S. v. Adobe, U.S. v. Lucasfilm and Pixar, and U.S. v. eBay to support their position that no poach agreements are per se unlawful.  Taken together, these cases challenged agreements not to solicit employees, hire employees, or make counteroffers to employees.  Although not explained by the Agencies, in denying eBay's motion to dismiss the DOJ's per se Section 1 claim, the court emphasized that its decision "does not in and of itself indicate that per se treatment is imminent" because the court was unable to assess the nature of the restraint without discovery. U.S. v. eBay, 968 F. Supp.2d 1030 (E.D. Cal. 2013).  With little judicial experience applying the per se rule to no poach agreements, the Agencies now take the position that no poach agreements will be pursued criminally.  A few settled cases and a motion to dismiss ruling that points out that per se treatment may not apply are thin support for such a dramatic change in policy.

Check Your Employment Policies; Review Your Conduct

In any event, HR professionals and in-house counsel who support them are now on notice that individual HR employees, and their companies, may be held criminally responsible for anticompetitive wage-fixing and no poach agreements, so they should take steps to avoid running afoul of the antitrust laws. The Agencies provided a list of " red flags" that HR professionals should look out for in their day-to-day work.  But the Agencies provided little specific guidance for HR Professionals, other than to note that terms contained in contracts between an employer and employee, including non-compete clauses, do not raise issues under the antitrust laws, although they may raise issues under certain state laws.

More useful guidance can be found in the consent decrees and competitive impact statements filed in the Adobe, Lucasfilm and eBay cases.  These consent decrees permit no poach agreements that are reasonably necessary for, and thus ancillary to, employee severance agreements and employer collaboration agreements related to joint ventures, shared use of facilities, consulting services, outsourcing agreements, OEM agreements, recruiting agreements, and mergers and acquisitions.  Note that no poach restraints contained in these types of agreements are not presumptively legal.  As explained above, they remain subject to scrutiny under the rule of reason and can be challenged by the agencies as a civil matter and by private treble damages suits.

In light of this new change in enforcement philosophy at the DOJ and FTC, HR professionals, working with in-house or outside counsel, should assess whether the company is currently a member of any wage-fixing or no poach agreement with a competing employer. Particular attention should be paid to possible oral agreements or understandings, "handshake agreements," and "gentlemen's agreements" that are not embodied in a written contract.  Any such agreement must be carefully analyzed to determine whether it exposes the company and its employees to criminal liability.  In addition, companies should review their various contractual relationships with suppliers, vendors and others.  The Agencies will most likely analyze any wage-fixing or no poaching restraints contained in these types of agreements under the rule of reason as ancillary restraints to a legitimate joint activity.  With respect to no poach agreements, HR professionals and their counsel should review these agreements to determine whether the restraint is overbroad in terms of geography, job function, product group, or time period.

The trap has been set; prudent professionals should be particularly vigilant lest they be caught in it.


1. The Agencies also provided guidance regarding the sharing of competitive sensitive information such as compensation rates and other terms of employment.  The Agencies confirmed that the specific guidance provided to the healthcare industry in the joint DOJ/FTC Statements of Antitrust Enforcement Policy in Healthcare are equally applicable to employers.  The sharing of competitive sensitive information may be legal if employers adopt proper safeguards to prevent harm to competition. For example, an information exchange may be lawful if a neutral third party manages the exchange.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
18 Aug 2019, Speaking Engagement, Florida, United States

ILTACON is the premier legal technology conference for professionals undertaking initiatives in support of the practice of law.

28 Aug 2019, Webinar, San Francisco, United States

This CLE webinar will analyze the potential antitrust ramifications of joint ventures (JVs) and other collaborations between competitors and how to balance the pro-competitive efficiencies against the anti-competitive effects of a proposed JV.

1 Oct 2019, Other, Washington, DC, United States

Orrick is proud to host the AIPN for its final breakfast meeting of 2019 for a session titled “Helping the World Gasify”. As natural gas production and use is very unevenly distributed throughout the world, often gas produced in association with crude oil is sold below cost or flared.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions