AGC's Human Resource and Labor News - November 8, 2016 / Issue No. 05-16 (Print All Articles)

Back to Graphical Version | Search back issues


Webinar: Federal Contractors, Get Ready for the New Paid Sick Leave Rule!

Virtually all construction contractors that perform work for the federal government will be required to provide paid time off to employees for sickness and other covered purposes under a new rule issued by the U.S. Department of Labor that takes effect on January 1, 2017. AGC of America will hold a WebEd (webinar) on November 16 from 2:00 to 3:30 p.m. Eastern Standard Time specifically to help construction contractors understand the rule’s myriad mandates and avoid costly sanctions for noncompliance.

Virtually all construction contractors that perform work for the federal government will be required to provide paid time off to employees for sickness and other covered purposes under a new rule issued by the U.S. Department of Labor that takes effect on January 1, 2017.  AGC of America will hold a WebEd (webinar) on November 16 from 2:00 to 3:30 p.m. Eastern Standard Time specifically to help construction contractors understand the rule’s myriad mandates and avoid costly sanctions for noncompliance.

Among the many issues addressed, the program will answer the following questions about the rule:

  • What types of contracts are covered?
  • Which employees are covered?
  • How much time off are employees entitled to and how is it accrued?
  • Does accrued leave carry over from year to year?
  • For what reasons is an employee entitled to paid leave?
  • What are the notice and recordkeeping requirements?
  • Can a PTO policy suffice?
  • How does the rule interact with state and local paid sick leave laws?
  • How does the rule interact with collective bargaining agreements?
  • Does the sick pay count toward Davis-Bacon prevailing wage obligations?
  • What are the flow-down responsibilities?

Click here for more info or to register now at the AGC-member price of $79 or the non-member price of $99.

This webinar has been approved for 1.5 General HR Recertification Credits by the HR Certification Institute.


Labor Department Publishes Final Rule on Paid Leave for Federal Contractors

The U.S. Department of Labor (DOL) has released its final rule to implement Executive Order 13706, which requires federal contractors to provide paid leave to employees for sickness and other covered purposes. AGC submitted extensive comments regarding the DOL proposed rule and testified before Congress on the significant statutory and practical compliance problems the executive order presents for the construction industry. Many of the complications in the proposed rule remain in the final rule, but several changes were made in response to AGC requests. Answers to key questions about the rule are provided below.

The U.S. Department of Labor (DOL) has released its final rule to implement Executive Order 13706, which requires federal contractors to provide paid leave to employees for sickness and other covered purposes.  AGC submitted extensive comments regarding the DOL proposed rule and testified before Congress on the significant statutory and practical compliance problems the executive order presents for the construction industry.  Many of the complications in the proposed rule remain in the final rule, but several changes were made in response to AGC requests.  Answers to key questions about the rule are provided below. 

When does the rule take effect?  The rule does not take effect until the effective date of regulations not yet issued by the Federal Acquisition Regulatory (FAR) Council.  Once effective, it will apply to new contracts that are awarded, or based on solicitations issued, on or after January 1, 2017.  Delayed implementation is provided for workers covered by collective bargaining agreements under certain circumstances.

What types of contracts does the rule cover?  The rule covers only contracts directly with the federal government for work to be performed within the U.S.  It does not apply to contracts with state government agencies, like state departments of transportation, even if the contracts are federally funded.  It covers contracts governed by the Davis-Bacon Act and the Service Contract Act, but not the Davis-Bacon Related Acts.

How much leave is required?  Contractors working under covered contracts and their subcontractors must allow covered employees to accrue one hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, up to 56 hours (7 days) in a year.  Employees are entitled to carry over up to 56 hours of unused leave from year to year while they work for the same contractor on covered contracts, and they generally get their unused leave back if they return to work within a year of separation.

What types of workers are covered?  The rule covers employees who perform work on or in connection with a covered contract.  This includes employees who are exempt under the Fair Labor Standards Act.  Independent contractors are also covered.  However, in response to an AGC request, the rule clarifies that bona fide independent contractor owner-operators and sole proprietors are not covered if they are not entitled to prevailing wages.  An exemption applies to employees who perform work in connection with covered contracts (but are not directly engaged in specific work called for by the contract) that amounts to less than 20 percent of their work hours in a given week. 

For what purposes may an employee take leave?  Contractors must allow employees to use paid sick leave for time they would otherwise be working on or in connection with covered contracts if the absence is due to:  (a) the employee’s own illness or health care, including preventative care; (b) the care of a family member or loved one who is ill or needs health care, including preventive care; or (c) being the victim of domestic violence, sexual assault, or stalking, or the need to assist a family member or loved one who is such a victim.

Will the cost of the paid leave count toward meeting Davis-Bacon prevailing wage obligations?  No. The Davis-Bacon Act prohibits contractors from taking credit for benefits required by federal, state, or local law.  In accordance with its interpretation of the Act, DOL in the present rule expressly states that contractors may not receive credit toward their prevailing wage or fringe benefit obligations under the Act for paid sick leave provided in satisfaction of the requirements of this rule.  Contractors may take credit for leave provided in excess of the rule’s requirements.

Must the contractor pay the employee directly for paid leave, or can it pay into a benefit fund?  In response to AGC’s request, the final rule adds a provision to permit contractors to fulfill their obligations under the rule jointly with other contractors – as though all of the contractors are a single contractor for purposes of the rule – through a multiemployer plan pursuant to a collective bargaining agreement if it provides paid sick leave that meets the rule’s requirements.  In further response, the final rule adds a provision clarifying that contractors may meet their obligations by contributing to a fund outside the collective bargaining context and delegate their responsibilities to plan administrators.  In all cases, the contractors remain responsible for any violations of the rule.

What are the flow-down requirements?  Covered prime contractors must include a designated contract clause in their subcontracts and must require, as a condition of payment, that subcontractors include the clause in any lower-tier subcontracts.  Prime and upper-tier contractor are responsible for compliance their subcontractors or lower-tier subcontractors.  In response to AGC’s request for removal of this liability, DOL stated that doing so could diminish the level of care that contractors exercise in selecting and monitoring their subcontractors.  DOL also noted that upper-tier contractors can, and often do, indemnify themselves against violations committed by lower-tier contractors.

AGC will hold a webinar to provide further guidance on the rule on November 16.  Click here for more info.

Additional resources about the rule are also provided on a dedicated page of DOL’s website.

For more information, contact Denise Gold at goldd@agc.org or Jimmy Christianson at christiansonj@agc.org.


Court Halts Key Provisions of “Fair Pay and Safe Workplaces” Implementation

On October 24, the U.S. District Court in the Eastern District of Texas granted a request for preliminary injunction against parts of the Obama Administration's implementation of the Fair Pay and Safe Workplaces, or "Blacklisting" as it is known, Executive Order. As a result, federal contractors will not—at this time—be required to report labor law violations with their bids on federal contract solicitations and awards. In addition, the court temporarily halted the federal government from enforcing the order's requirement regarding contractor arbitration agreements with employees covering disputes arising out of sexual assault or harassment disputes, among other things. The court, however, did not bar implementation of the order's paycheck transparency requirements scheduled to take effect on January 1, 2017.

On October 24, the U.S. District Court in the Eastern District of Texas granted a request for preliminary injunction against parts of the Obama Administration's implementation of the Fair Pay and Safe Workplaces, or "Blacklisting" as it is known, Executive Order. As a result, federal contractors will not—at this time—be required to report labor law violations with their bids on federal contract solicitations and awards.  In addition, the court temporarily halted the federal government from enforcing the order's requirement regarding contractor arbitration agreements with employees covering disputes arising out of sexual assault or harassment disputes, among other things. The court, however, did not bar implementation of the order's paycheck transparency requirements scheduled to take effect on January 1, 2017.

The Obama Administration will very likely take steps to counter this court order. The situation, therefore, remains fluid. It is unclear how long implementation of this Executive Order and its various requirements will be delayed. The court order certainly delays implementation of the labor law violation reporting for solicitations on contracts exceeding $50 million issued on or after October 25 and the arbitration agreement requirement also scheduled to take effect October 25. Nevertheless, it remains undetermined how or if this court order will impact other implementation deadlines. To review when those deadlines as currently scheduled, see AGC's comprehensive review of the EO here.

AGC and other business groups are currently determining how best to proceed, including whether to file another case separately and/or bolster the current legal challenge. Ultimately, AGC's goal remains not only temporary relief, but the complete dismantling of this unconstitutional executive order and its unnecessary regulatory regime.

For more information, contact Jimmy Christianson at 703-837-5325 or christiansonj@agc.org.


Minimum Wage for Federal Contractors Increases to $10.20

On September 20, the U.S. Department of Labor’s Wage and Hour Division (WHD) published a notice in the Federal Register announcing a minimum wage increase of $0.05 to $10.20 per hour for direct federal contracts and subcontracts covered by Executive Order 13658. Federally assisted contracts are not affected. The rate goes into effect on January 1, 2017.

On September 20, the U.S. Department of Labor’s Wage and Hour Division (WHD) published a notice in the Federal Register announcing a minimum wage increase of $0.05 to $10.20 per hour for direct federal contracts and subcontracts covered by Executive Order 13658.  Federally assisted contracts are not affected.  The rate goes into effect on January 1, 2017.

Executive Order 13658 was signed by President Obama in 2014, and its corresponding regulations implemented an hourly minimum wage for workers performing work on covered federal contracts of $10.10 per hour beginning on January 1, 2015.  The order mandated that the Secretary of Labor determine a new minimum wage annually, based on the annual percentage increase in the Consumer Price Index for urban wage and clerical workers.  Notice is required to the public at least 90 days before the new wage goes into effect each year.

Impacted workers include those whose wages are governed by the Davis-Bacon Act , the Service Contract Act, and non-exempt workers whose wages are governed by the Fair Labor Standards Act (FLSA) for all time spent directly supporting a covered contract.  FLSA-covered workers who do not spend at least 20% of the workweek directly supporting a covered contract are excluded. 

Covered contractors with existing projects or awards are entitled to an adjustment by federal agencies if the annual inflation increase was not covered by the existing contract or award. 

For more information on Executive Order 13658 including AGC’s impact on the final rule, click here.


Benefit Funds Can Seek Contributions from Independent Contractor that Signed “Me-Too” Agreement 17 Years Earlier

A contractor signatory to an old “me-too” agreement with an “evergreen” clause could be responsible for benefit and other fund contributions required by a later multiemployer collective bargaining agreement (a “CBA”) even though the contractor was not a member of the multiemployer group and did not grant continuous bargaining rights to the group, the U.S. Court of Appeals for the Third Circuit (DE, NJ, PA) has held.

A contractor signatory to an old “me-too” agreement with an “evergreen” clause could be responsible for benefit and other fund contributions required by a later multiemployer collective bargaining agreement (a “CBA”) even though the contractor was not a member of the multiemployer group and did not grant continuous bargaining rights to the group, the U.S. Court of Appeals for the Third Circuit (DE, NJ, PA) has held. 

The contractor in the case, Management Resource Systems (“MRS”), signed a letter of assent in 1997 binding it to the 1997-2001 CBA between the Interior Finish Contractors Association (“IFCA”), and Metropolitan Regional Council of Carpenters.  It did not sign a subsequent letter of assent or other agreement with the union, and it stopped making fund contributions after the CBA expired.  The funds sued MRS in 2014, claiming that MRS improperly failed to make contributions required under the 2012-2015 CBA between the IFCA and Carpenters.  The funds argued that MRS was bound to the successor CBA because the 1997 me-too agreement contained an evergreen clause stating that the agreement would remain in effect “for the duration of the collective bargaining agreement between the [union] and [IFCA] that is effective on the date of this Agreement and for the duration of any addition, modification or renewal thereof until one party shall provide to the other written notice…to terminate,” and MRS (undisputedly) never provided such notice.

The district court dismissed the funds’ complaint.  The court relied on the National Labor Relations Board’s 1994 Luterbach ruling.  In Luterbach, the Board held that a nonsignatory 8(f) employer will be bound by multiemployer bargaining only if the employer (1) was "part of the multiemployer unit prior to the dispute" and (2) "has, by a distinct affirmative action, recommitted to the union that it will be bound.  Because neither element was satisfied here, the court held that MRS could not be bound by the 2012-2015 CBA.

The circuit court reversed the district court’s decision and revived the complaint.  The court found that the Luterbach test does not apply here because Luterbach did not involve an evergreen clause and because the test only applies to resolve ambiguity about the employer's commitment to be bound.  The circuit court noted that the Board in Luterbach recognized that “there can be cases where an employer has expressly given continuing consent to bargain a successor contract on a multiemployer basis.”  Here, the evergreen clause in the “me-too” agreement constitutes such consent.  “Luterbach is limited to cases that do not involve evergreen clauses or other continuing grants of bargaining authority,” the circuit court held.

Instead of applying Luterbach, the circuit court relied on the Board’s 1995 Baker Electric decision.  Baker Electric held that an employer was bound to a successor CBA pursuant to a me-too agreement with an evergreen clause.  The court rejected MRS’s argument that Baker Electric is distinguishable because it involved a broader delegation of bargaining authority than in the present case.  The court found no significant difference between the contract clauses granting authority in the two cases.  The court further noted that its decision to apply Baker Electric, and to enforce an evergreen clause in the absence of termination notice, is consistent with decisions of the Fifth (LA, MS, TX), Sixth (KY, MI, OH, TN), Eighth (AR, IA, MN, MO, NE, ND, SD), and Ninth (AK, AZ, CA, ID, MT, NV, OR, WA, HI) Circuits. 

The court also rejected a policy argument by MRS about the importance of protecting employers’ rights to bargain on their own behalf.  “Nothing here suggests that MRS was somehow coerced or duped into entering into the me-too agreement clearly binding it to future CBAs,” stated the court.  “The agreement was voluntarily executed, and MRS does not argue to the contrary.  MRS failed to terminate or properly repudiate the agreement according to its express terms.  We are therefore confident that enforcement of the me-too agreement in no way vitiates MRS’ rights.”

This case serves as an important reminder that contractors should be cognizant of the terms they’ve agreed to their labor agreements, including less formal letter agreements.  A contractor that leaves an area where it has been signatory to a labor agreement other than a project labor agreement may find itself still bound by the agreement’s contribution requirements, wage provisions, subcontracting restrictions, and other terms if it returns to the area in the future without first terminating the agreement in accordance with the contract terms.  Contractors seeking to end their labor obligations should pay careful attention to the provisions of evergreen and termination clauses.  They should also consider the potential for withdrawal liability. Furthermore, those with 9(a) agreements may have a continuing duty to recognize the union even after contract termination.  (For information on the distinction between 8(f) and 9(a) agreements, visit AGC’s online Labor & HR Topical Resources library.  Select the main category “Collective Bargaining” and the subcategory “Collective Bargaining Agreements:  8(f) vs. 9(a).”  AGC-member login is required to access most resources.)  Consultation with a construction labor lawyer is well-advised.  (Click here for a directory of AGC Labor and Employment Law Council members.)

Carpenters Health & Welfare Fund of Phil. & Vicinity v. Management Resource Systems, Inc., Case No. 15-2508 (3rd Cir., 9/13/16).


OFCCP Expands Focus on Construction Mega Projects

On September 23, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced a significant expansion of its Mega Construction Project (MCP) Program. The expanded program will use new, standardized processes, expanded resources, experienced new staff, and agency oversight, including the addition of a national coordinator.

On September 23, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) announced a significant expansion of its Mega Construction Project (MCP) Program.  The expanded program will use new, standardized processes, expanded resources, experienced new staff, and agency oversight, including the addition of a national coordinator. 

OFCCP believes that MCPs are the most effective strategy for achieving contractors’ compliance with OFCCP’s regulations and, ultimately, for increasing the representation of women, minorities, individuals with disabilities, and protected veterans in the trades.   As of August 1, 2016, OFCCP had 35 open MCPs. MCPs include both direct federal and federally-assisted construction projects.

Projects selected for the MCP Program are valued at $25 million or more and are expected to last for at least one year.  In selecting MCPs, OFCCP works with the General Services Administration and other federal agencies to identify large, high-profile projects when they are funded, before any construction begins. Once identified, OFCCP takes a three-prong approach to working with stakeholders in the program: community outreach, compliance assistance, and compliance evaluation.  

OFCCP has made available a number of resources for contractors who may be impacted by the MCP program such as a Fact SheetFAQsBest Practices for Construction Contractors and Subcontractors, and the agency’s Standard Operating Procedures for MCPs.

For more information on OFCCP and the laws it is responsible for enforcing, visit the OFCCP website.  AGC members may find additional information and resources on AGC’s Labor & Topical Resources webpage.  The primary category is “EEO” and the secondary category is “Affirmative Action/EEO.” Members must be logged-in to see and/or download all available resources.


EEOC Announces New Enforcement Priorities

Earlier this week, the Equal Employment Opportunity Commission (EEOC) announced a new series of enforcement priorities on which it will focus over the next five years. By releasing its second-ever Strategic Enforcement Plan, the EEOC provided a clear message to employers regarding the areas that will occupy a considerable amount of attention when it comes to investigations, enforcement actions, and litigation from 2017 to 2021.

Earlier this week, the Equal Employment Opportunity Commission (EEOC) announced a new series of enforcement priorities on which it will focus over the next five years. By releasing its second-ever Strategic Enforcement Plan, the EEOC provided a clear message to employers regarding the areas that will occupy a considerable amount of attention when it comes to investigations, enforcement actions, and litigation from 2017 to 2021.

Although the 23-page document contains a number of themes, four of them appear to be of particular concern to the agency: 21st century employment relationships; the discriminatory backlash against those of Middle Eastern descent and those who practice associated religions; the use of data-centered hiring mechanisms by the high-tech industry; and the concept of equal pay.

Modern Employment Relationships
For the first time, the EEOC’s Strategic Enforcement Plan focuses on the fact that the modern business world contains all sorts of various employment relationships that did not exist with the same prevalence in previous generations. Specifically, the agency notes that “complex employment relationships and structures in the 21st-century workplace” will bear its attention, pointing out that temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy will be in its sights in the immediate future.

Employers across the country have faced an increasing number of misclassification challenges, with current and former workers, not to mention numerous government agencies, alleging that organizations have improperly labeled employees as independent contractors. Such challenges can lead to liability in the areas of benefits, workers’ compensation coverage, unemployment insurance, payroll taxes, and related matters.

Although the EEOC does not often venture into these typical flashpoint areas, it does stake a claim as being the federal government’s main watchdog agency when it comes to civil rights laws. And although independent contractors are rarely entitled to the benefits of federal civil rights protections (such as Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, and other similar statutory schemes), employees most certainly are. Therefore, the EEOC believes that misclassification of workers can deprive groups of individuals to the types of protections it can secure for them.

To this end, expect the EEOC to wade into the misclassification arena over the coming years, targeting gig economy and sharing economy companies as the new breeding ground for what it considers to be improper contractor relationships.

On a related note, the National Labor Relations Board (NLRB) has focused much of its attention in recent years on the concept of joint employment, broadening the definition as much as possible to ensure the largest possible pool of workers covered by the National Labor Relations Act. It appears that the EEOC will lock arms with the NLRB and echo the same refrain, attempting to capture as many workers as possible under the umbrella of joint employment with an eye towards holding as many employers as possible liable under federal civil rights laws. You can expect the agency to direct resources towards the joint employment issue in the coming years as well.

Backlash Discrimination
The new Strategic Enforcement Plan adds another priority for the agency: claims of backlash discrimination against individuals who are Muslim or Sikh, or persons of Arab, Middle Eastern, or South Asian descent, as well as those perceived to be in these ethnic or religious groups. The EEOC states that “tragic events” in the United States and across the globe have increased the likelihood of discrimination against individuals in these communities.

Employers should ensure that their antidiscrimination policies and practices are robust enough to address any such behavior that could take place in their workplaces. Certain employers may even want to specifically address this concept in managerial training sessions.

Attacking Big Data
The EEOC’s Plan opines that there is a lack of diversity in the technology sector, and states that it will take efforts in the coming five years to address what it perceives to be one of the causes: data-driven screening tools. The agency points out that certain hiring and recruiting techniques – the use of algorithms and internet data-scraping utilizing big data, for example – could actually end up harming a company’s diversity efforts.

An EEOC administrator recently provided an example of the way in which these high-tech methods could end up leading to discriminatory practices. The agency’s chief analyst at the Office of Research, Information and Planning pointed out that when an employer selects the characteristics that it believes would make someone a good hire or cultural fit at a company, and then seeks out job candidates based on those characteristics, it could lead to a disparate impact claim.

According to reports, she provided a hypothetical scenario of an emerging company made up primarily of younger males that wants to find new employees that fit in with its culture. If that employer used advanced algorithms to locate job candidates who shared common characteristics with existing successful workers, such as biking to work or preferring perks like happy hours, it could lead to a homogenized workforce. Such hiring techniques could simply replicate the existing demographic profile of the employer, screening out older workers and women, as those potential workers might instead prefer other perks like child care or insurance benefits.

If employers decide to employ cutting edge recruiting and hiring methods, they should work closely with their legal counsel to establish parameters that will reduce or eliminate unintended discriminatory acts. The EEOC believes that if the use of these algorithms results in an adverse impact, it would be the employers’ responsibility to prevent valid evidence to support their use. To present falling into this “guilty until proven innocent” rubric, employers will want to focus now on ensuring their recruiting practices don’t lead to an uneven playing field.

Equal Pay For Equal Work
Finally, it should come as no surprise that the EEOC has decided to renew its focus on equal pay for the coming enforcement period. The federal government waded back into this area in 2016 by announcing the wholesale revision of the EEO-1 Form, which will soon capture compensation data in an effort to identify unfair pay practices. Beginning with the 2017 compensation year, employers will have their pay practices under a microscope like never before.

The EEOC will be at the forefront of this intensified scrutiny, collecting data and examining employer compensation schemes to ensure that women and ethnic minorities are not being shortchanged for comparable work. Employers will want to immediately conduct a self-audit of their pay practices to ensure that, once placed under the spotlight, their compensation system does not reflect discriminatory practices.

Editor’s note: This article was written by guest author Richard Meneghello of Fisher & Phillips, LLP.    This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

For more information about the EEOC and the laws it is responsible for enforcing, visit the EEOC’s website or AGC’s Labor & HR Topical Resources Webpage.  The primary category is EEO.


New EEO-1 Report Finalized, First Report Due March 2018

On September 29, the U.S. Equal Employment Opportunity Commission (EEOC) announced that starting March 2018, it will collect summary employee wage and hours-worked data from some employers. Employers are required to continue use of the existing form until March 2018, when 2017 data will be reported. Visit the EEOC’s website for a sample of the new form.

On September 29, the U.S. Equal Employment Opportunity Commission (EEOC) announced that starting March 2018, it will collect summary employee wage and hours-worked data from some employers.  Employers are required to continue use of the existing form until March 2018, when 2017 data will be reported.  Visit the EEOC’s website for a sample of the new form

Employers – including federal contractors and subcontractors – with 100 or more employees will report summary pay data using the new form. Federal contractors and subcontractors with 50-99 employees will not report summary pay data, but they will continue to report employees by job category as well as by sex, ethnicity, and race as they do now. Employers with 99 or fewer employees and Federal contractors and subcontractors with 49 or fewer employees will not be required to complete the EEO-1 report as is current practice.  Federal contractor and subcontractor data will be shared with the Office of Federal Contract Compliance Programs. 

Earlier in the year, AGC submitted comments to both the EEOC and the Office of Management and Budget opposing implementation of the new form.  In both letters, AGC explained that the collection of wage and hours-worked data is not necessary because better suited tools already exist to assist with compensation benchmarking.  Additionally, national wage data is useless for benchmarking purposes in construction and government analysis will not account for a wide variety of factors used to determine compensation.

While AGC’s comments stressed that this data collection is not needed, in an effort to mitigate the burdensome impact the proposed changes would have on its members should the report become final, AGC urged the EEOC to consider the use of W-2 data – specifically Box 5 data – to make reporting easier for employers and to change the reporting date to a post-annual reporting date that would accommodate the use of such data.  The EEOC accepted both requests, with the exception of using Box 1 W-2 Data instead of Box 5.

Fact Sheet for Small Businesses and a question and answer document can be found on the EEOC’s website.  For additional information and resources, visit AGC’s Labor & HR Topical Resources website. The primary category is “EEO.”


DOJ Published Antitrust Guidance for HR Professionals Relating to No-Poaching and Wage-Fixing Agreements

In a series of investigations and subsequent court actions, HR professionals have been identified as being potential targets for investigation of allegations of violations of antitrust laws related to employment practices, generally under the topic of “anti-poaching” policies. Under federal antitrust policies competitors may not agree to limit or fix the terms of hiring for potential employees. In October of this year, the Department of Justice Antitrust Division (DOJ) issued a guideline to HR Professionals to prevent inappropriate discussions or practices among competitors seeking to hire the same employees. The Antitrust Guidance for Human Resource Professionals (the “Guidance”) states that it is “unlawful for competitors to expressly or implicitly agree not to compete with one another when they are competing for the same employees.

In a series of investigations and subsequent court actions, HR professionals have been identified as being potential targets for investigation of allegations of violations of antitrust laws related to employment practices, generally under the topic of “anti-poaching” policies.  Under federal antitrust policies competitors may not agree to limit or fix the terms of hiring for potential employees.  In October of this year, the Department of Justice Antitrust Division (DOJ) issued a guideline to HR Professionals to prevent inappropriate discussions or practices among competitors seeking to hire the same employees.  The Antitrust Guidance for Human Resource Professionals (the “Guidance”) states that it is “unlawful for competitors to expressly or implicitly agree not to compete with one another when they are competing for the same employees.

In the Guidance, the DOJ states that competitors may violate antitrust laws when HR professionals agree to provide salaries or compensation to employees at a specific level or within a range or when they agree to refuse to solicit or hire another company’s employees (“no-poaching agreements.”)

The Guidance states that “naked wage-fixing or no-poaching agreements among employers, whether entered into directly or through a third-party intermediary, are per se illegal under the antitrust laws.” That means if the agreement is separate from or not necessary to a larger legitimate collaboration between employers, the agreement is deemed illegal without an inquiry into its competitive effects. However, the DOJ has stated that legitimate joint ventures, including, for example, using shared facilities, are not considered per se illegal under the antitrust laws.

The Guidance references civil actions brought by the DOJ against the Arizona Hospital & Healthcare Association where hospitals in Arizona attempted to set uniform rate schedules for pay for temporary and per diem nurses.  Further, three DOJ civil actions have been brought against competing technology companies that entered into agreements not to cold-call other companies’ employees. In two of the cases, at least one company also agreed to limit its hiring of employees who currently work for a competitor.  The antitrust claims in these cases were resolved by consent judgments against the companies.

Additionally, the Guidance indicates that the DOJ intends to proceed criminally against naked wage-fixing or no-poaching agreements.  According to the Guidance, such agreements “eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers, which have traditionally been criminally investigated…”

The DOJ emphasized that it has sued the Utah Society for Healthcare Human Resources Administration, a society of HR professionals at Utah hospitals, for antitrust violations where competitors directly shared with each other information about terms and conditions of employment, and such sharing was found to have an anticompetitive effect. 

Information exchanges can avoid per se antitrust scrutiny where: 

  • A neutral third party manages the exchange;
  • The exchange involves information that is relatively old;
  • The information is aggregated to protect the identity of the underlying sources; and
  • Enough sources are aggregated to prevent competitors from linking particular data to individual sources.

The Guidance goes on to provide a series of questions and answers for HR professionals to review when dealing with specific competitor exchanges of information or agreements between competitors about policies or practices.  The Guidance notes, however, that these are general discussions and that particular concerns by an HR professional about a specific practice should be discussed with legal counsel. 

Editor’s note: This article was written by guest author John Allgood of FordHarrison’s Noncompete/Restrictive Covenants practice group This publication is intended for general information purposes only and does not and is not intended to constitute legal advice.  The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.


For more information or to contact us directly, please visit agc.org | © AGC, 2004 – All rights reserved