Antitrust Laws in the Workplace: Increased Enforcement and Advice for Employers

The Biden administration has increasingly used the nation’s antitrust laws to challenge business practices that restrict workers from competing for higher wages and improved work conditions. Among the administration’s targets are employers who share wage and benefit information, enter into “no-poach” agreements, and require mandatory non-compete agreements. In light of these developments, it is more likely that businesses will find their employment practices under scrutiny by the federal enforcement agencies—the Antitrust Division of the Department of Justice and the Federal Trade Commission. Employers should therefore familiarize themselves with the antitrust implications of their employment practices, and understand options to mitigate the risk of running afoul of antitrust laws.

By way of background, Congress enacted the antitrust laws to counter monopoly control and prevent companies from acting in concert to control prices. 15 U.S.C. § 1. The laws advance these interests by prohibiting conduct that is per se anticompetitive (such as wage fixing), and conduct that has the effect of suppressing competition. In the workplace setting, antitrust laws operate on the principle that employers may not explicitly or impliedly agree not to compete with each other. Antitrust issues can therefore arise when competing employers enter into agreements that restrict competition with regard to wages or benefits, or limit job opportunities or other terms of employment.

The federal enforcement agencies have issued guidance on situations likely to create antitrust issues. These include agreements between employers: (1) to control employee salary, benefits, or other terms of compensation, or; (2) to refrain from soliciting or hiring employees of the other employer (“no poaching” agreements). This is true regardless of whether the agreement is formal or informal, and extends to circumstances where, even in the absence of an agreement, the exchange of information creates an inference of a common plan to restrict competition. There are several types of situations likely to raise antitrust concerns:

• information exchanges concerning employee salaries, benefits, and other compensation arrangements;
• agreements between two or more employers not to solicit or hire employees of the other employer;
• agreements concerning terms or conditions of employment;
• agreements not to compete too aggressively in recruiting for employees;
• sharing company-specific information about employee compensation or terms of
  employment with another company;
• participating in trade or business meetings where the above topics are discussed;
• discussing the above topics with colleagues at other companies, including during social events or other non-professional settings;
• receiving documents that contain another company’s internal data about employee
  compensation.

The risks associated with information exchanges and agreements are evident in recent actions brought by the federal enforcement agencies. For example, the Department of Justice obtained a guilty plea in a 2022 case involving a healthcare staffing company that entered into an agreement with a competitor to fix the wages paid to contract nurses. The federal district court imposed a criminal fine of $62,000 on the staffing company and ordered restitution of $72,000 to impacted nurses. In another case this year, a business owner was prosecuted and ultimately found guilty of obstructing a Federal Trade Commission investigation into charges of labor-market collusion. The case involved an alleged agreement to fix the wages paid to patient care therapists. The business owner faces a penalty of five years imprisonment and a $250,000 fine. 

These cases can also result in costly settlements. For example, the Department of Justice recently brought a civil antitrust lawsuit against several companies who allegedly engaged in a conspiracy to exchange information about employee wages and benefits. The proposed settlement would require the companies to pay $84.8 million in restitution to workers who were harmed by the information exchange. It would also impose a court-appointed monitor to ensure ongoing compliance with the terms of the settlement. 

With this in mind, the federal enforcement agencies have issued guidance on how businesses may be able to qualify for a “safety zone” in the context of sharing information with competitors:

• Information collected is managed by a third party (e.g., a purchaser, government agency, healthcare consultant, academic institution, or trade association);
• data shared with or available to competitors is more than three months old; 
• at least five entities are reporting data and no individual entity’s data represents more than 25 percent of the overall data; and
• information shared is sufficiently aggregated so that recipients cannot identify the specific data shared by an individual entity.

Conclusion

While there is no end in sight to the administration’s ratcheting up of antitrust enforcement efforts, businesses are well advised to conform to existing guidance issued by the Department of Justice and Federal Trade Commission, and to monitor litigation developments and any future guidance issued by the federal enforcement agencies.