Employment & Labor Insider

These are not easy times to be in human resources. Attracting, recruiting, and retaining talented employees is as challenging as ever. As I have previously written, wages are increasing 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.

Background

The Sherman Antitrust Act was enacted 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. Section 2 prohibits the unlawful monopolization or attempted monopolization of trade or commerce.

Section 1 is most relevant for our discussion. 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 violate the law by weighing the anti-competitive and pro-competitive effects of the restraint. 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. 

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 a certain price.

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

What does this have to do with HR?

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

In 2016, the FTC and U.S. Department of Justice released a guidance document on antitrust law for HR professionals. We reported about it here and here. The document is worth reviewing in full, but the following is a summary of the relevant issues:

• Pay: Competitors cannot agree on what to pay their employees. This is considered to be price fixing. The definition of “competitor” in a labor market is broad. Competitors exist both in terms of industries and roles. For example, Apple and Microsoft are prohibited from agreeing on employee pay because they are offer similar products and services. However, any companies that employ, and thus compete for, information technology professionals are prohibited from agreeing to the pay for those professionals.
• Sharing of information: Even “implicit” agreements concerning employee pay are problematic. 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. Even without an express agreement to suppress wages, HR may use the information for that purpose, 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.

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.