White House Announces Actions Against Wage Collusion, Noncompetes and “Other Anticompetitive Practices”

The White House has detailed a broad series of new administrative steps in response to an earlier Executive Order “calling for actions that enhance competition to benefit consumers, workers, and entrepreneurs.” The White House described these steps as consistent with the continuing effort of the administration to find ways to increase job growth and reduce income inequality across the country. Although the new administrative steps do not include new prohibitions and generally do not require immediate action, the steps do raise the possibility of near-term legislative and regulatory actions for which employers should be watchful. There also is an indication of increased antitrust enforcement against non-solicitation and non-hire agreements between employers.

The White House announcement focused on three new actions:

1. Promoting Wage Competition: The Council of Economic Advisers has released an “Issue Brief” addressing sources of wage-setting power and how such power can reduce wages, employment, and overall market welfare. The brief discusses policy actions taken by the Obama Administration “to help promote labor-market competition and ensure a level playing field for all workers.”
2. Tamping Down Noncompete Agreements. “State Call to Action” urging states to discourage or prohibit the use of noncompete agreements and prescribing best practices, including enactment of legislation that would: i) ban noncompete agreements among certain categories of workers, including workers laid off or terminated without cause; and ii) disallow noncompetes unless they are part of an original job offer or significant promotion. The announcement advocates for enactment of federal legislation, too, to eliminate noncompetes for workers under a certain salary threshold.
3. Wage Collusion/Noncompetition Antitrust Alert. Noncompete agreements now are a significant antitrust focus for the Obama administration, which asserts that they artificially restrict competition. The FTC and the Department of Justice (DOJ) jointly issued “Antitrust Guidance for HR Professionals.” This guidance instructs HR professionals how to spot and report collusion among competing employers that may violate the antitrust laws, such as wage collusion or no-poaching employees agreements. Also released was a State-by-State “Explainer” of Noncompete Laws to educate workers, employers, policymakers, and advocates, about existing state laws and some of the key issues related to noncompete agreement reform.

The indication is that going forward, the DOJ will criminally investigate allegations that employers have agreed amongst themselves on employee compensation or not to solicit or hire one another’s employees. The antitrust guidance provides a reporting hotline to the DOJ Antitrust Division. Employers may want to consider whether they have engaged in any agreements or practices that might raise antitrust concerns.

Overall, employers will want to keep a close watch for further legal developments in the context of administrative efforts to boost the economic prospects of the average American worker. 

Posted by Mark S. Mathison and Quentin R. Wittrock