Overview
A version of this newsletter appeared on the American Bar Association website.
The Biden administration made many last-ditch efforts before the end of its term and across several agencies to entrench its labor and antitrust policies that favor workers. Less than a week before the Trump administration took over, the Federal Trade Commission (FTC) and the Department of Justice (DOJ), in conjunction with other agencies and, for two cases, with States Attorneys General, took a series of actions, changing guidance and filing lawsuits. Additionally, a private class action lawsuit against an employer utilizes the same labor antitrust theories that the agencies use. While the Trump administration is unlikely to continue robust enforcement in the labor markets, we expect State Attorneys General and the private plaintiffs’ bar to pick up the baton.
Changes in Labor Market Enforcement Guidelines
On January 16, the DOJ and the FTC jointly issued Antitrust Guidelines for Business Activities Affecting Workers (New Guidelines), which replaced the 2016 Antitrust Guidance for Human Resource Professionals (Old Guidelines). The New Guidelines explain how the two agencies identify and assess the antitrust risks of business practices and certain types of agreements that affect workers.
The New Guidelines align with the DOJ/FTC’s prioritization of protecting workers from alleged anticompetitive agreements in recent years. The New Guidelines emphasize that the agencies will closely scrutinize the following business practices and agreements:
- Agreements between companies that operate in the same labor market (i.e., compete for the same workers) not to recruit, solicit, or hire workers, or to fix wages or terms of employment. Under the New Guidelines, companies will be subject to criminal prosecution for these agreements. Unlike the Old Guidelines, this rule now applies to joint ventures.
- As was the case under the Old Guidelines, agreements in the franchise context not to poach, hire, or solicit employees of the franchisor or franchisees.
- Exchange of competitively sensitive information about terms and conditions of employment with companies that compete for workers. In contrast to the Old Guidelines, this also applies to information exchanges facilitated by or through third party intermediaries.
- Employment agreements (e.g., non-compete provisions) that restrict workers’ freedom to leave their job or start a competing business. This rule extends the Old Guidelines by applying antitrust scrutiny to non-compete provisions that prohibit employees from starting a competing business.
- Unlike the Old Guidelines, the New Guidelines prohibit the following practices: Other restrictive, exclusionary, or predatory employment conditions that harm competition such as overly-broad non-disclosure agreements, training repayment provisions, non-solicitation agreements, and exit fee or liquidated damages provisions.
As to all of these agreement types, the New Guidelines, unlike the Old Guidelines, reach agreements with independent contractors as well. The FTC’s enactment of the New Guidelines was approved by a 3-2 vote along party lines. Both Republican Commissioners dissented, criticizing “the lame-duck Biden-FTC.” This suggests that the new administration’s Republican-majority FTC (and likely the Antitrust Division), spurred on by a Trump administration-wide review of last-minute Biden policy pronouncements, will either rescind or revamp the New Guidelines.
Protecting Whistleblowers from Non-Disclosure Agreements
Two days before the issuance of the New Guidelines, DOJ and Occupational Safety and Health Administration (OSHA) issued a joint statement in which the Agencies affirmed that corporate non-disclosure agreements (NDAs) that discourage employees from reporting antitrust crimes and “other crimes” violate whistleblower laws, most notably the Criminal Antitrust Anti-Retaliation Act of 2019 (CAARA). Under CAARA, employers are precluded from dismissing or otherwise retaliating against employees for (1) reporting potential criminal antitrust violations to their employer or the federal government or (2) assisting a federal government investigation or proceeding. Companies who violate CAARA could have criminal antitrust charges brought against them in addition to civil enforcement actions brought by the Department of Labor.
In the statement, DOJ/OSHA asserted that employees are often the ones “best positioned to detect and blow the whistle on antitrust crimes,” and that the joint statement reflects an attempt to protect “to the fullest extent of the law” those who report such crimes against “fear of retaliation or retribution.” The statement emphasized that DOJ will scrutinize NDAs that compromise employee, contractor, subcontractor, or agent rights under CAARA by prohibiting or discouraging individuals from reporting antitrust violations. Additionally, DOJ/OSHA make it clear that the improper use of NDAs to obstruct or impede investigations may also constitute separate federal crimes under federal obstruction statutes. Even “the mere implication” that a non-disclosure agreement precludes individuals from reporting antitrust crimes or assisting in an investigation, is a violation of CAARA and the DOJ’s leniency policy, according to the statement.
The joint statement’s position on NDAs reflects an interpretive gloss on CAARA’s prohibitive scope, which does not expressly prohibit acts that deter employee reporting before it occurs. In addition to the potential consequences on DOJ’s charging decisions should a criminal antitrust investigation prompted by whistleblower occur, CAARA authorizes the Department of Labor to bring civil enforcement against companies who violate CAARA. However, such civil enforcement must be initiated by a complaint filed by the retaliated party. In that respect, it presents a narrower government enforcement risk than the prohibitions under SEC Rule 21F-17(a), which expressly prohibits actions that “impede individuals from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement…,” and which can be enforced by the US Securities and Exchange Commission (SEC) even absent a complainant. Nonetheless, publicly traded companies should keep the joint statement in mind to the extent that their current compliance with Rule 21F-17(a) is confined to narrow carve-outs for “securities law violations.” And privately-held companies should consider drafting their NDAs with employees to account for the joint statement’s enforcement gloss on CAARA, and to look to SEC enforcement actions under Rule 21F-17(a) for guidance as to the types of NDA-related prohibitions that could give rise to CAARA liability.
The Director of Criminal Enforcement of the DOJ’s Antitrust Division, Emma Burnham, recently endorsed the Biden-era whistleblower guidelines, indicating that the Trump administration will embrace this policy. Burnham supported the guidelines, stating that employees “need to be sure that NDAs are clear that [they] can come forward[.]”1
FTC Policy Statement that Gig Workers Can Unionize
Less than a week before President Trump was sworn in, on January 14, the FTC issued an enforcement policy statement that expands the reach of the labor exemption to antitrust liability to include organizations by independent contractors, or “gig workers.” Prior to the issuance of this statement, it was well established that employees who are directly hired by an employer were protected from antitrust liability under this exemption when organizing or bargaining with that employer over compensation or working conditions. The statement asserts that traditional employees should not be distinguished from gig workers when it comes to demanding fair working conditions and compensation.
This action was taken amidst an economic shift towards employing gig workers to perform work historically performed under traditional direct-hire employment models. The statement attributed this phenomenon, in part, to the rise of “online gig platforms” that “often seek to categorize their workers’ tasks and compensation in ways that run counter to the promise of independence.” This so-called “gig economy,” the FTC asserted, results in lower wages and incomes for gig workers. The expansion of the labor exemption to gig workers, the statement declared, is “firmly grounded” in the text of the Clayton and Norris-Laguardia Acts.
As with other last-ditch policy efforts by the Biden administration, the new administration is unlikely to abide by this statement. Although it’s unclear whether the Republican-led FTC will disavow or simply ignore this statement, gig workers will likely face challenges with any attempts to organize and bargain for improved working conditions and higher pay. To date, courts have not directly addressed this issue. Under the Trump administration, however, precedent in this area may develop if the FTC decides to disavow the statement.
FTC and Private Cases Target No-Hire Provisions in Vertical Contracts
Three recent cases demonstrate that the risk of no-hire provisions in vertical customer-supplier contracts continues to rise. In a recent post, we discussed the first-ever antitrust agency action against no-hire agreements in supplier contracts: FTC v. Guardian Services Industry, Inc. Since then and in the waning days of the Biden administration, the FTC has finalized a consent order in the Guardian case. Moreover, two additional cases – one brought by the FTC in conjunction with New Jersey and New York and one class action brought by private plaintiffs - have underscored the continuing risk posed by these provisions. Even though the FTC under the incoming Trump administration is unlikely to continue focusing future investigations on no-hire provisions, the threats from private plaintiffs and state AGs remain.
On January 17, the FTC approved a consent order requiring Guardian Service Industries, Inc. (Guardian) to stop enforcing its no-hire agreements. The order was approved by a 3-2 vote, with both Republican Commissioners dissenting. In addition to enjoining Guardian from imposing no-hire provisions within its vertical contracts, the order requires Guardian to inform all current and prospective employees and customers that its no-hire agreements are null and void.
Additionally, on January 6, the FTC, in tandem with the New York and New Jersey Attorneys General, filed an administrative no-poach complaint against a second building services contractor, Planned Building Services (PBS), on the same theory and with a similar proposed consent order. The FTC alleged that PBS’s no-hire agreements in its customer service contracts impose a penalty on building owners and competing building services contractors if they hire PBS employees. The provision imposes a “conversion fee” totaling three months’ average earnings per employee and remains in effect until 6 months have passed since an individual is no longer employed by PBS.
The FTC further alleged that these no-hire agreements limit PBS employees’ ability to negotiate higher wages, better benefits, and improved working conditions from building owners. Additionally, these provisions also allegedly restricted building owners from seeking or accepting bids from PBS’ competitors due to the prospect of losing long-serving employees. The FTC also alleged that these no-hire agreements harm consumers by disincentivizing competing building services contractors from investing in and meeting customer demand for increased quantity, quality, and variety of services.
Under the proposed consent order, PBS must stop enforcing its no-hire agreements and inform customers and current and prospective employees that these provisions are no longer in effect. This includes hanging conspicuous signage in employee areas that these agreements are null and void.
In the case brought by a private plaintiff, on December 20, 2024, a former employee brought a class action lawsuit against Sedgwick Claims Management Services, Inc. (Sedgwick), an insurance services provider. The former employee, on behalf of a proposed class including all insurance personnel currently or formerly employed with Sedgwick, alleges that Sedgwick illegally uses no-hire agreements with its customers to prevent employee mobility or advancement. The complaint further alleges that Sedgwick uses no-hire agreements not only to prevent employees from moving to customers of all sizes, but also as part of an elaborate scheme to suppress employee compensation and benefits. The plaintiff also alleges that while Sedgwick generates a significant profit as an industry leader, employee compensation pales in comparison to that of its competitors as a direct result of Sedgwick’s illegal use of no-poach agreements to stifle employee mobility and earning opportunities.
Taken together, these cases emphasize the elevated risk associated with no-poach agreements in vertical supplier-customer agreements. This risk began with Judge Easterbrook’s 2023 decision in Deslandes v. McDonald’s, which set a very high bar for applying an ancillary restraints defense to a no-poach agreement (described further here).
It is unclear how the change in administration will affect enforcement against no-hire agreements. In his concurring statement approving the complaint against PBS, newly-appointed FTC Chair Andrew Ferguson stated that “the Commission should devote substantial resources to protecting competition in labor markets.” In differentiating his vote in favor of the PBS complaint from his vote against the Guardian complaint, however, Ferguson explained that there was evidence of anticompetitive effects in the former, but not the latter. There is a clear signal that the FTC will continue to enforce labor antitrust cases under Trump, but only where anticompetitive effects can be clearly shown.
Further, even if the Trump administration sets a higher bar for bringing no-hire cases, there nonetheless remains an elevated risk. First, both of the FTC cases were filed jointly with the states of New Jersey and New York. This emphasizes that state-level enforcement, at least in blue states, is likely to continue. Second, the theories set forth in Sedgwick provide a roadmap for similar complaints from the class action plaintiffs.
These developments demonstrate that companies should begin re-examining their contracts that affect their relationships with employees. As discussed, the risk goes beyond direct contracts with employees and extends to contracts with suppliers. Although the Trump administration’s labor market enforcement will be less vigorous than under Biden administration, federal, state, and private enforcement will continue, so companies should be proactive in evaluating their agreements regarding employees for antitrust risk.
1 Chris May, US DOJ Compliance Guidance Aimed at NDAs, Whistleblowers, Top Enforcer Says, MLex (Jan. 31, 2025), https://content.mlex.com/#/content/1627694/us-doj-compliance-guidance-aimed-at-ndas-whistleblowers-top-enforcer-says.
