The Biden administration made many last-ditch efforts across several agencies to entrench its labor and antitrust policies. Less than a week before President Trump took office, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) took a series of actions, including changing guidance and filing lawsuits. If the Trump administration does not continue robust enforcement in the labor markets, we expect State Attorneys General and the private plaintiffs’ bar to pick up the baton.
On January 16, the DOJ and the FTC jointly issued Antitrust Guidelines for Business Activities Affecting Workers (New Guidelines), which replaced the 2016 Antitrust Guidance for Human Resource Professionals (Old Guidelines). The New Guidelines explain how the two agencies identify and assess the antitrust risks of business practices and certain types of agreements that affect workers.
The New Guidelines align with the DOJ/FTC’s prioritization in recent years of protecting workers from alleged anticompetitive agreements. The New Guidelines emphasize that the agencies will closely scrutinize the following business practices and agreements:
As to all of these agreement types, the New Guidelines, unlike the Old Guidelines, reach agreements with independent contractors as well. The FTC’s enactment of the New Guidelines was approved by a 3-2 vote along party lines. Both Republican Commissioners dissented, criticizing “the lame-duck Biden-FTC.” This suggests that the new administration’s Republican-majority FTC (and likely the Antitrust Division), spurred on by a Trump administration-wide review of last-minute Biden policy pronouncements, could either rescind or revamp the New Guidelines.
Two days before the issuance of the New Guidelines, DOJ and the Occupational Safety and Health Administration (OSHA) issued a joint statement in which the Agencies affirmed that corporate non-disclosure agreements (NDAs) that discourage employees from reporting antitrust crimes and “other crimes” violate whistleblower laws, most notably the Criminal Antitrust Anti-Retaliation Act of 2019 (CAARA). Under CAARA, employers are precluded from dismissing or otherwise retaliating against employees for (1) reporting potential criminal antitrust violations to their employer or the federal government or (2) assisting a federal government investigation or proceeding. Companies who violate CAARA could have criminal antitrust charges brought against them in addition to civil enforcement actions brought by the Department of Labor.
In the statement, DOJ/OSHA asserted that employees are often the ones “best positioned to detect and blow the whistle on antitrust crimes,” and that the joint statement reflects an attempt to protect “to the fullest extent of the law” those who report such crimes against “fear of retaliation or retribution.” The statement emphasized that DOJ will scrutinize NDAs that compromise employee, contractor, subcontractor, or agent rights under CAARA by prohibiting or discouraging individuals from reporting antitrust violations. Additionally, DOJ/OSHA make it clear that the improper use of NDAs to obstruct or impede investigations may also constitute separate federal crimes under federal obstruction statutes. Even “the mere implication” that a non-disclosure agreement precludes individuals from reporting antitrust crimes or assisting in an investigation, is a violation of CAARA and the DOJ’s leniency policy, according to the statement.
The joint statement’s position on NDAs reflects an interpretive gloss on CAARA’s prohibitive scope, which does not expressly prohibit acts that deter employee reporting before it occurs. In addition to the potential consequences on DOJ’s charging decisions should a criminal antitrust investigation prompted by whistleblower occur, CAARA authorizes the Department of Labor to bring civil enforcement against companies who violate CAARA. However, such civil enforcement must be initiated by a complaint filed by the retaliated party. In that respect, it presents a narrower government enforcement risk than the prohibitions under SEC Rule 21F-17(a), which expressly prohibits actions that “impede individuals from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement…,” and which can be enforced by the US Securities and Exchange Commission (SEC) even absent a complainant. Nonetheless, publicly traded companies should keep the joint statement in mind to the extent that their current compliance with Rule 21F-17(a) is confined to narrow carve-outs for “securities law violations.” And privately-held companies should consider drafting their NDAs with employees to account for the joint statement’s enforcement gloss on CAARA, and to look to SEC enforcement actions under Rule 21F-17(a) for guidance as to the types of NDA-related prohibitions that could give rise to CAARA liability.
The Director of Criminal Enforcement of the DOJ’s Antitrust Division, Emma Burnham, recently endorsed the whistleblower guidelines stating that employees “need to be sure that NDAs are clear that [they] can come forward[.]”
On January 14, the FTC issued an enforcement policy statement that expands the reach of the labor exemption to antitrust liability to include organizations by independent contractors, or “gig workers.” Prior to the issuance of this statement, it was well established that employees who are directly hired by an employer were protected from antitrust liability under this exemption when organizing or bargaining with that employer over compensation or working conditions. The statement asserts that traditional employees should not be distinguished from gig workers when it comes to demanding fair working conditions and compensation.
This action was taken amidst an economic shift towards employing gig workers to perform work historically performed under traditional direct-hire employment models. The statement attributed this phenomenon, in part, to the rise of “online gig platforms” that “often seek to categorize their workers’ tasks and compensation in ways that run counter to the promise of independence.” This so-called “gig economy,” the FTC asserted, results in lower wages and incomes for gig workers. The expansion of the labor exemption to gig workers, the statement declared, is “firmly grounded” in the text of the Clayton and Norris-Laguardia Acts.
As with other last-ditch policy efforts by the Biden administration, the new administration may not abide by this statement. If the Republican-led FTC disavows or simply ignores this statement, gig workers will likely face challenges with any attempts to organize and bargain for improved working conditions and higher pay. To date, courts have not directly addressed this issue. Under the Trump administration, however, precedent in this area may develop if the FTC decides to disavow the statement.
Recent cases demonstrate that the risk of no-hire provisions in vertical customer-supplier contracts continues to rise. On January 17, the FTC approved a consent order requiring Guardian Service Industries, Inc. (Guardian) to stop enforcing its no-hire agreements. The order was approved by a 3-2 vote, with both Republican Commissioners dissenting. In addition to enjoining Guardian from imposing no-hire provisions within its vertical contracts, the order requires Guardian to inform all current and prospective employees and customers that its no-hire agreements are null and void.
Additionally, the FTC, in tandem with the New York and New Jersey Attorneys General, filed an administrative no-poach complaint against a second building services contractor, Planned Building Services, Inc. (PBS), on the same theory and with a similar proposed consent order. The FTC alleged that PBS’s no-hire agreements in its customer service contracts impose a penalty on building owners and competing building services contractors if they hire PBS employees. The provision imposes a “conversion fee” totaling three months’ average earnings per employee and remains in effect until 6 months have passed since an individual is no longer employed by PBS.
The FTC further alleged that these no-hire agreements limit PBS employees’ ability to negotiate higher wages, better benefits, and improved working conditions from building owners. Additionally, these provisions also allegedly restricted building owners from seeking or accepting bids from PBS’ competitors due to the prospect of losing long-serving employees. The FTC also alleged that these no-hire agreements harm consumers by disincentivizing competing building services contractors from investing in and meeting customer demand for increased quantity, quality, and variety of services.
Under the proposed consent order, PBS must stop enforcing its no-hire agreements and inform customers and current and prospective employees that these provisions are no longer in effect. This includes hanging conspicuous signage in employee areas that these agreements are null and void.
It is unclear how the change in administration will affect enforcement against no-hire agreements. In his concurring statement approving the complaint against PBS, newly-appointed FTC Chair Andrew Ferguson stated that “the Commission should devote substantial resources to protecting competition in labor markets.” In differentiating his vote in favor of the PBS complaint from his vote against the Guardian complaint, however, Ferguson explained that there was evidence of anticompetitive effects in the former, but not the latter. There is a clear signal that the FTC will continue to enforce labor antitrust cases under Trump, but only where anticompetitive effects can be clearly shown.
Further, even if the Trump administration sets a higher bar for bringing no-hire cases, there nonetheless remains an elevated risk. For example, the FTC cases were filed jointly with the states of New Jersey and New York. This emphasizes that state-level enforcement, at least in blue states, is likely to continue.
These developments demonstrate that companies should begin re-examining their contracts that affect their relationships with employees. As discussed, the risk goes beyond direct contracts with employees and extends to contracts with suppliers. Although the Trump administration’s labor market enforcement could be less vigorous than under Biden administration, federal, state, and private enforcement will continue, so companies should be proactive in evaluating their agreements regarding employees for antitrust risk.
