Mr. Paul R. Hitchcock is Senior Policy Advisor in Holland & Knight's Jacksonville office
With the Justice Department now publicly cracking down on arrangements between employers such as so-called " no-poaching" agreements, what's an employer to do to make sure its compensation for employees with highly portable skills stays competitive? Figuring out "what's market" is a crucial aspect of retaining talent, but the information is difficult to get. Discussions with other employers who compete for talented people run the risk of claims of "wage fixing" – a form of buyer price fixing.
Fortunately, there is a pretty reliable safe harbor available to employers who are willing to go to the effort to follow Justice Department guidelines. In late 2016, the DOJ shook up corporate Human Resources departments by announcing that it would consider criminal prosecution of employers that enter agreements not to recruit each other's employees, or not to compete on terms of compensation. But at the same time, it also set out ways that an information exchange could be structured to avoid potential antitrust consequences.
The Department offered four guidelines for sharing compensation information that, if followed, should insulate the information gathering process from antitrust challenge:
- The exchange of compensation information is managed by a neutral third party
- The information exchanged is relatively old
- The information is aggregated so that no recipient can associate a participating company with particular information
- There are enough aggregated sources to prevent recipients from linking particular data to particular companies
Considerable additional insight into these guidelines can be found in the principles that the DOJ articulated in 1996 in its Statements of Antitrust Enforcement Policy in Health Care. While that statement focused on issues in a particular industry, the principles on sharing employee compensation information apply equally well to all employers that compete for talent.
Neutral party. Likely safe choices to manage a survey are an academic institution, an independent consultant, or a trade association.
Dated information. In the employment field, data that is more than three months old is likely to meet this standard, but still be recent enough so that the results serve as a useful benchmark for employers.
Aggregated sources. The information disseminated must be aggregated to a level that ensures that a reader cannot determine the data submitted by single participant, even if unidentified.
Number of participants. Most likely five suppliers of information for each category of data will be enough to ensure that the reported information cannot be linked to a particular participant; provided that no individual company represents more than 25 percent of the reported data.
One important consideration for employers to keep in mind is that they don't necessarily compete only for employees with competitors in their own industry. Companies in a process-oriented manufacturing field will likely view themselves as competing nationwide for engineers with expertise in that particular process. But a bank, an accounting firm, a university and a manufacturer in a mid-sized city may very well compete to hire accounting talent from one another.
Now, to be sure, the Department's guidelines are couched in qualified language, such as "may be lawful," but by following the their guidelines, employers can have a very high degree of confidence that they have insulated themselves from antitrust exposure.
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