Human Capital Management Blog

Strategies for HCM Professionals

Hiring People and Defining Compensation? Then Antitrust Laws Apply

Antitrust laws govern the behavior of HR professionals, management, and anyone else involved with hiring people and defining compensation and benefits. For many HR professionals this is not news. However, new guidance released by the Department of Justice (DOJ) and Federal Trade Commission (FTC) signals the need for those individuals, and organizations in general, to diligently guard against the appearance of anti-competitive behaviors when hiring, setting salaries, and defining benefits.

This article examines the important aspects of the new guidance and provides a quick reference of the salient points.

Antitrust Laws for Hiring and Salary Decisions?

Why do antitrust laws apply to the conduct of HR professionals and organizations that hire people and set their salaries? It comes down to one of the tenets of free market economics which states that “prices for goods and services are determined by the open market and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.”[1] Similar to how competition among producers of goods gives consumers the benefits of lower prices, product advances, and more innovation, the argument goes that competition among employers provides benefits to employees in a free market. The logic is easy to follow. Someone with an in-demand skillset will likely command a higher salary or better benefits if employers who need their skillset are competing. Antitrust laws help to ensure the employers are competing in the employment marketplace.

In their document, Antitrust Guidance for Human Resource Professionals, available to download here, the DOJ and FTC point out how “firms that compete to hire or retain employees are competitors in the employment marketplace, regardless of whether the firms make the same products or compete to provide the same services [emphasis added].” That’s an important point to consider. Put another way, organizations must compete in the employment marketplace even if they are not competitors in any goods or services marketplace.

But We Compete to Attract Talent All the Time, So We’re Fine

Not necessarily. While employing recruiters and hiring people away from other firms is certainly competitive in a general sense, it does not mean you can ignore the guidance from the DOJ and FTC. Antitrust laws are concerned with:

  • Wage-fixing agreements. Any agreement with another company about employee salaries or other terms of compensation. An attempt to set compensation at a specific level or within a defined range of compensation is likely unlawful.
  • No poaching agreements. Agreeing to refuse to solicit or hire another company’s employees.

Wage-fixing agreements often come about from pressure to reduce costs. Hiring managers or business leaders may attempt to reach agreements on standard salaries or rates in their industry or reduce benefits equally among different firms. Express agreements like these are the easiest type of unlawful behavior to spot and avoid but the laws also apply to implicit methods of achieving the same result:

“For example, the DOJ sued the Utah Society for Healthcare Human Resources Administration, a society of HR professionals at Utah hospitals, for conspiring to exchange nonpublic prospective and current wage information about registered nurses. The exchange caused defendant hospitals to match each other’s wages.”[2]

The case was settled, with aconsent order prohibiting the behavior and requiring the Utah Society for Healthcare Human Resources Administration to create a compliance program and show the DOJ evidence of their compliance every year for the next five years. The consent judgment is available online.

Summary of the Guidance

Summarizing the guidance issued by the DOJ and FTC boils down to a few of key points:

  • Stand-alone agreements among employers not to recruit certain employees are likely unlawful
  • Stand-alone agreements among employers not to compete on terms of compensation are likely unlawful
  • Avoid sharing sensitive information with competitors – evidence of “discussions and parallel behavior may lead to an inference that an agreement was reached.” [3]

By following the DOJ’s guidance as part of your overall compliance strategy, you and your organization will be taking important steps toward antitrust compliance and you will be helping to do your part to cultivate a free employment market, which benefits not only your employees but also your customers who benefit from the goods and services produced by a more competitive workforce.

[1] Wikipedia, The Free Encyclopedia, s.v. “Free Market,” (accessed November 10, 2016), https://en.wikipedia.org/wiki/Free_market

[2] Department of Justice Antitrust Division and Federal Trade Commission, Antitrust Guidance For Human Resource Professionals (October 2016), accessed November 9th, 2016 https://www.justice.gov/atr/file/903511/download

[3] DOJ and FTC, Antitrust Guidance For Human Resource Professionals

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