FTC Updates Antitrust Guidance for Employers

Wage-fixing, no-poaching, and noncompete agreements are included in business practices that may violate antitrust laws, according to updated guidelines from the Federal Trade Commission (FTC) and the U.S. Department of Justice Antitrust Division.

On Jan. 16, the agencies issued an update to its antitrust guidance for HR professionals, first published in 2016. The guidelines outline specific types of agreements—and practices, such as sharing competitively sensitive information about wages and making false claims about workers’ potential earnings—that may violate federal law. The guidance reflects updated case law.

The FTC’s stance on noncompete agreements is listed, even though a federal court blocked the agency’s final rule that explicitly banned noncompete agreements.

“The antitrust laws protect all Americans, including workers, from illegal monopolization, collusion, and unfair methods of competition,” said outgoing FTC Chair Lina M. Khan. “These antitrust guidelines provide clarity to businesses about the practices that can violate the law—from agreements between firms to fix workers’ wages to coercive noncompetes.”

The FTC vote approving the joint guidance was 3-2, with the two Republican commissioners dissenting because “the lame-duck Biden-Harris FTC…has no future.”

Key parts of the guidance include:

• Businesses that compete with each other for workers may be committing a crime if they enter into an agreement not to recruit, solicit, or hire workers or an agreement to fix wages or terms of employment.
• Agreements between franchisees and franchisors not to compete for workers could be per se illegal under antitrust law.
• Sharing sensitive information about compensation, benefits, and employment contract terms with competitors may violate antitrust laws.
• Restrictive covenants such as nondisclosure agreements, nonsolicitation agreements, exit fees, and training repayment provisions could be illegal depending on the circumstances.
• Making false or misleading claims about workers’ potential earnings can violate the law.
• Enforcing noncompete clauses that restrict workers from switching jobs or starting a competing business can violate antitrust laws. The FTC may investigate and take action against noncompete agreements and other restraints on worker mobility that limit competition, the guidance states.

In April 2024, the FTC issued a final rule banning most noncompete agreements. Before that rule went into effect in September, however, the District Court for the Northern District of Texas issued an order on Aug. 20, 2024, setting it aside. The order is currently on appeal.

The FTC retains the legal authority to address noncompete agreements through case-by-case enforcement actions under the FTC Act, as it has done in the past, the guidance reiterated.