By Chris Deubert
Constangy, Brooks, Smith & Prophete, LLP

Maybe don’t get a drink with your competitor.

These are not easy times to be in human resources (HR).  Attracting, recruiting, and retaining talented employees is as challenging as ever.  Wages are growing quickly, employees are quitting jobs in record numbers, and there are far more job vacancies than there are job seekers.  In addition, multiple states and cities have recently passed legislation requiring that pay ranges be included in job postings.  The result is a tight, competitive, and potentially costly labor market.

Given these labor market conditions, employers may understandably be looking for ways to retain their workforce and control labor costs.  In doing so, HR professionals and executives should be mindful of antitrust law.

Antitrust Law Background

The Sherman Antitrust Act was passed in 1890 in an effort to rein in the sprawling corporate behemoths that had come to dominate a variety of industries, such as oil and gas and railroads.  Today, the Sherman Act serves the purpose of protecting the efficient operation of markets, with the related intended benefit of promoting consumer welfare, such as through lower prices or greater product choices.

The Sherman Act consists of two sections.  Section 1 prohibits contracts, combinations, or conspiracies that restrain trade and Section 2 prohibits the unlawful monopolization or attempted monopolization of trade or commerce.

Section 1 is most relevant for our discussions.  Early Supreme Court decisions clarified that Section 1 prohibits “unreasonable” restraints of trade.  Courts apply a complicated “rule of reason” test to evaluate which restraints are violative of the law by weighing the anti-competitive and pro-competitive effects of the restraint.  Of additional relevance, Section 1 requires a plurality of actors – it contemplates and seeks to prevent two or more participants in a market coming together in a way that would harm the functioning of that market.

Further to both of these points, courts hold that certain agreements among competitors are so “pernicious,” that they are per se illegal, meaning that the alleged wrongdoers can have no defense as a matter of law.  The principal example of a per se violation is price fixing, in which competitors agree not to sell their products for less than certain price.

Antitrust law is receiving increased attention as Lina Khan, the Chairperson of the Federal Trade Commission (FTC), has taken an aggressive stance on antitrust enforcement, pursuing new regulations and actions against a variety of companies.

Antitrust and HR

The labor market is governed by antitrust law in the same manner as the market for cars, smartphones, or any other range of products in services.  In the present context, antitrust law is concerned about how competitors compete for employees.

In 2016, the FTC and Department of Justice released a guidance document on antitrust law for HR professionals.  The document is worth reviewing in full but I will summarize the relevant issues here:

• Pay: Competitors cannot agree what to pay employees. Such actions constitute price fixing inconsistent with the efficient operation of a labor market in which employees can offer their services to the highest bidder (taking into account any contractual obligations they might have).  Importantly, the definition of a competitor in a labor market is broad.  Competitors exist both in terms of industries and roles.  For example, Apple and Microsoft cannot agree as to employee pay because they are offer similar products and services.  At the same time, any number of companies employ, and thus compete for, information technology professionals.  These employers also cannot agree to the pay for such professionals.
• Sharing of Information: Implicit agreements concerning employee pay are also problematic.  Such implicit agreements or understandings are often reached through the sharing of information, formally or informally.  For example, HR professionals may casually chat at a conference or other industry event with their competitor counterparts about their workforce and payroll.  However, these professionals may then use that information to suppress pay raises or offers, chilling both pay and movement in the labor market.  Antitrust law disfavors this result and these practices.
• No Poach Agreements: An efficient labor market results in the free movement of employees to other places of work where their services might be more useful or valued. Competitors restrain the labor market when they agree not to recruit or hire their competitors’ employees.  Again, such agreements are often more implicit and understood than explicit and written.  Either way, employers cannot agree not to pursue a competitor’s employees.  The FTC has attacked McDonald’s for doing so.

HR professionals are well-versed in employment law.  And antitrust law is a complex, somewhat obscure area of the law.  Nevertheless, it is important that HR professionals understand antitrust law’s purposes and prohibitions.