On July 19, 2022, the Federal Trade Commission (FTC) and the National Labor Relations Board (NLRB) announced they were joining forces to “bolster the FTC's efforts to protect workers by promoting competitive U.S. labor markets and putting an end to unfair practices that harm workers.“1 A memorandum of understanding (MOU) reached between the two agencies outlines the ways they will work together going forward on labor issues. The new effort is just the latest example of the U.S. antitrust agencies' aggressive agenda to police antitrust violations in labor markets.
The key takeaways from the MOU are twofold:
- The FTC and the NLRB agreed upon several “issues of common regulatory interest,“ including labor market developments relating to the “gig economy,“ the imposition of restrictive covenants (such as noncompetes), workers' ability to act collectively, and worker classification.2
- The agencies will cooperate by a) engaging in information sharing and cross-agency consultations for law enforcement purposes, b) cross-agency training to educate each agency's personnel about the other's laws and regulations, and c) coordinated outreach and education.3
In its announcement, the FTC said that the agreement “is part of a broader FTC initiative to use the agency's full authority, including enforcement actions and Commission rulemaking, to protect workers.“4 Indeed, the agency has previously announced it is factoring in “additional facets“ of competition in its merger reviews, including “how a proposed merger is affecting labor markets.“5 Recent Second Requests have required parties to produce documents and information regarding the parties' efforts to compete for employees, and the FTC and the Department of Justice (DOJ) have jointly indicated their intention to address labor market issues in future revisions to the Horizontal Merger Guidelines.6 Outside of the merger context, the FTC has held public workshops to explore the legal and economic bases for a potential rulemaking to restrict the use of noncompete clauses.7
The FTC's initiative is part of a broader Biden Administration effort to prioritize antitrust enforcement in labor markets. President Biden's July 2021 Executive Order on competition tasked the U.S. Treasury Department, in conjunction with the U.S. Department of Labor, the DOJ, and the FTC, to investigate “the effects of lack of competition on labor markets.“8 The Treasury report, published in March 2022, summarized academic research finding that the decrease in wages due to labor market power was “roughly 20 percent relative to the level in a fully competitive market.“9 The DOJ has also taken steps to increase enforcement in labor markets. It has brought a number of criminal indictments against alleged wage-fixing and no-poach agreements, though its record at trial has been underwhelming. In April 2022, two DOJ criminal trials against wage-fixing and no-poach agreements ended in acquittals for all alleged conduct around hiring (though a defendant in one of the cases was found guilty of obstruction of justice).10 The DOJ claims it is undeterred by these defeats, and has several other criminal cases pending that allege labor market antitrust violations.11
Conclusion
The MOU between the FTC and the NLRB is another data point that the U.S. antitrust agencies continue to put labor markets at the top of their policy and enforcement agenda. While these efforts are still in flux, companies should take care to avoid even the appearance of no-poach or wage-fixing agreements with other companies and should be judicious in their use of restrictive covenants such as noncompete clauses. Further, companies considering mergers and acquisitions should evaluate potential effects on labor markets when assessing deal risk.
For more information, please contact Jamillia Ferris, Michelle Yost Hale, Mark Rosman, Jeff VanHooreweghe, or another member of the firm's antitrust and competition practice.
[1] Press Release, Federal Trade Commission, “Federal Trade Commission, National Labor Relations Board Forge New Partnership to Protect Workers from Anticompetitive, Unfair, and Deceptive Practices” (July 19, 2022), available at https://www.ftc.gov/news-events/news/press-releases/2022/07/federal-trade-commission-national-labor-relations-board-forge-new-partnership-protect-workers?utm_source=govdelivery.
[2] Memorandum of Understanding Between the Federal Trade Commission (FTC) and National Labor Relations Board (NLRB) Regarding Information Sharing, Cross-Agency Training, and Outreach in Areas of Common Regulatory Interest (July 19, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/ftcnlrb%20mou%2071922.pdf (MOU), at § 3.
[5] Press Release, Federal Trade Commission, “Making the Second Request Process Both More Streamlined and More Rigorous During this Unprecedented Merger Wave” (Sept. 28, 2021), available at https://www.ftc.gov/enforcement/competition-matters/2021/09/making-second-request-process-both-more-streamlined-more-rigorous-during-unprecedented-merger-wave.
[6] Press Release, Federal Trade Commission, “Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers” (Jan. 18, 2022), available at https://www.ftc.gov/news-events/news/press-releases/2022/01/federal-trade-commission-justice-department-seek-strengthen-enforcement-against-illegal-mergers.
[7] Press Release, Federal Trade Commission, “Non-Competes in the Workplace: Examining Antitrust and Consumer Protection Issues” (Jan. 9, 2020), available at Image https://www.ftc.gov/news-events/events/2020/01/non-competes-workplace-examining-antitrust-consumer-protection-issues.
[8] Executive Order on Promoting Competition in the American Economy, The White House, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
[9] Treasury Dep’t, “The State of Labor Market Competition” (March 7, 2022), available at https://home.treasury.gov/system/files/136/State-of-Labor-Market-Competition-2022.pdf.
[10] “First DOJ Criminal Wage-Fixing and No-Poach Trials End in Acquittals,” Wilson Sonsini Client Alert, https://www.wsgr.com/en/insights/first-doj-criminal-wage-fixing-and-no-poach-trials-end-in-acquittals.html.
