Recent Doj And Ftc Guidance Regarding No-Poaching And Wage-Fixing Agreements

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On Thursday, October 20, 2016, the United States Justice Department’s Antitrust Division (DOJ) and the Federal Trade Commission (FTC) issued guidance for Human Resources professionals indicating that going forward, they intend to pursue criminal and/or civil charges against individuals and companies who enter into naked no-poaching agreements and/or wage fixing agreements that are unrelated to a larger legitimate collaboration between companies. Briefly, no-poaching agreements are agreements with other individuals or companies to refrain from soliciting or hiring the employees of that other company, and wage-fixing agreements are agreements with other individuals or companies concerning salaries or other terms of compensation, either at a specific level or within a range of employees or jobs. Importantly, such agreements may be either oral or written, and the DOJ and FTC intend to consider even the solicitation of such agreements as criminal. Moreover, even in the absence of an explicit agreement or solicitation, the government’s sweeping guidance states that merely sharing information with a competitor regarding an employer’s terms and conditions of employment may constitute evidence of an illicit implied agreement. The DOJ and FTC will consider such agreements as “naked” when they are separate from or not reasonably necessary to a larger legitimate collaboration between the companies at issue—that is, legitimate joint ventures such as agreements resulting from the shared use of facilities likely would not be considered illegal.

Although the DOJ and FTC specifically noted that this new guidance does not address the legality of specific terms contained in contracts between an employer and employee (including non-compete clauses), this guidance still presents issues in light of established restrictive covenant laws. For example, Alabama’s recently enacted restrictive covenants statute expressly authorizes contracts between businesses or between a person and a business “limiting their ability to hire or employ the agent, servant, or employees of a party to the contract where the agent, servant, or employee holds a position uniquely essential to the management, organization, or service of the business.” Ala. Code §§ 8-1-190(b)(1). The recent DOJ and FTC guidance seems contrary to this authorization, so companies contemplating such agreements under Alabama law must carefully examine and consider the consequences of taking any steps toward such agreements. Additionally, it is unclear whether the DOJ and FTC would consider agreements reached in connection with the settlement of ongoing litigation to be “naked” agreements.

The DOJ and FTC’s guidance seems strong and heavy-handed, but there may exist opportunities to obtain further guidance from the DOJ and FTC with regard to particular joint ventures or other business conduct. Accordingly, anyone involved in or contemplating involvement in agreements that may be impacted by this guidance should seek assistance in navigating this evolving landscape.

With attorneys experienced in both white collar crime and restrictive covenants, Maynard & Gale stands in a unique position to advise anyone who may have questions regarding these issues. Please call on us if we can be of service.