Federal Government Warns That Anti-Poaching and Wage-Fixing Agreements May Violate Antitrust Laws. What Does This Mean for Texas Companies?

dojThe Department of Justice (DOJ) and Federal Trade Commission (FTC) recently issued Antitrust Guidance for HR Professionals (“Guidance”) intended to alert professionals involved in hiring and compensation decisions to potential violations of the antitrust laws.

This Guidance is the result of the infamous wage-fixing anti-poaching agreement among Ebay, Google, Apple, and other heavy-weights of the tech industry, which came to light in 2010 during the DOJ investigation and a civil class action involving 64,000 employees of such companies that settled in September of last year.

You can find the full text here, but the Guidance can be boiled down to the following simple rules for HR professionals:

  • companies that compete for employees are competitors regardless of whether they sell the same products or provide the same services
  • it is unlawful for competitors to agree not to compete with each other
  • therefore, companies may not agree – expressly or implicitly, in writing or orally – not to poach each other’s employees or to cap salaries or benefits of their employees
  • specifically, HR professionals are “likely” breaking the anti-trust laws if they:
    • agree with individuals at another company about employee salary or other terms of compensation, either at a specific level or within a range (wage-fixing agreement), or
    • agree with individuals at another company to refuse to solicit or hire that other company’s employees (“no poaching” agreements)
  • HR professionals should avoid sharing sensitive information with competitors as it could serve as evidence of an implicit illegal agreement (especially where it causes companies to match each other’s arrangement)

What are the consequences of violating the anti-trust rules?  The DOJ and/or FTC may bring a felony criminal prosecution against individuals involved in anti-poaching or wage-fixing agreements, the company, or both. Additionally, individual employees may bring a civil suit for three times the damages they suffered.

Takeaway for HR Professionals: We all know that price-fixing for goods is illegal, i.e., competing companies cannot get together and agree to charge consumers a certain price for certain goods in the market.  The Guidance makes it clear that agreeing on wages for employees is just as illegal and will be prosecuted.

What does this mean for Texas companies in terms of non-compete agreements?  The companies may still enter into such agreements with their employees (as long as they comply with the Texas Covenants not to Compete Act).  However, they cannot agree with other competing companies on the terms of such non-compete agreements. For example, Companies A and B, which are competing for the same employees, cannot enter into an agreement that they both will tie up their employees with no less than a 2-year, 30-mile non-compete agreement, or that the non-compete specifically will prohibit employees from working for Company A (if they worked for Company B), and vice versa. When in doubt about the legality of your particular agreement, seek legal counsel.

Leiza litigates unfair competition, non-compete and trade secrets lawsuits on behalf of companies and employees, and has advised hundreds of clients regarding non-compete and trade secret issues. If you need assistance with a non-compete or a trade secret misappropriation situation, contact Leiza for a confidential consultation at LDolghih@GodwinLaw.com or (214) 939-4458.

 

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