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Criminal Antitrust Investigations Likely Underway in the Area of Employee Compensation and Hiring

In November 2016, we reported that the nation’s antitrust enforcement agencies, the Antitrust Division of the Department of Justice (DOJ) and the Federal Trade Commission, had jointly issued Antitrust Guidance for Human Resources Professionals alerting companies and HR professionals to beware of the antitrust risk involved in hiring and compensation decisions. The Agencies warned against agreements between two or more employers to limit or fix the terms of employment; to set wages and other compensation; or to refrain from soliciting or recruiting one another’s employees (referred to as “no-poaching” agreements). The 2016 Guidance put companies and individuals on notice that, going forward, such conduct would be subject to criminal prosecution.

Recent signals and statements from antitrust enforcers suggest that criminal investigations of no-poaching agreements and related conduct are now under way and indictments likely are imminent. In January, newly confirmed Antitrust head Assistant Attorney General Makan Delrahim announced at a Washington, DC-area conference that DOJ has opened several “active” investigations in this area and that he has been “shocked” at the prevalence of such conduct. More recently, on February 16, 2018, at the American Bar Association’s International Cartel Workshop in Paris, Delrahim again reiterated that prosecution announcements are near. While DOJ has not disclosed what industries it is currently investigating there have been indications that high tech, financial, and pharmaceutical companies may be under the microscope. The risk for no-poaching agreements is greatest in industries with highly talented, uniquely skilled, identifiable, and mobile employees.

So what can a company do to protect itself? A good first step is to conduct an assessment to determine if problematic conduct may be occurring. Also, provide antitrust training for senior executives, talent recruiters and human resources professionals. Managers need to understand the dangers of sharing sensitive employment information (such as employee compensation and benefits) with competitors, and should avoid discussions about solicitating — or decisions not to solicit — each other’s employees. No-poaching and non-competition terms in business or employment agreements should be vetted by a qualified antitrust attorney before they are proposed, even orally, to another party. Finally, if potential wrongdoing is detected, promptly consult with antitrust counsel about next steps. Even if a no-poaching agreement (or other clear antitrust violation) already exists, companies that promptly approach DOJ about discovered conduct and promptly cease that conduct are more likely to be treated leniently, if they report the conduct early. Time is of the essence in these situations because DOJ encourages a “race to the door” in which the first-in company receives far greater benefits than the company in second place.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.