The COVID-19 pandemic has brought unprecedented changes to seemingly all aspects of modern life and the American economy, some of which may last for years to come. The response to the pandemic has shown similarly unprecedented levels of cooperation between governmental and corporate entities, many of whom are direct competitors, particularly in the pharmaceutical, healthcare, and manufacturing industries. This cooperation has raised concerns about potential anticompetitive behavior.
Earlier this month, the Antitrust Division of the Department of Justice and the Bureau of Competition of the Federal Trade Commission issued a statement concerning cooperation and competition in response to COVID-19. The primary concern expressed by the agencies was the potential effect of anticompetitive behavior on frontline responders to the pandemic, including “doctors, nurses, first responders, and those who work in grocery stores, pharmacies, and warehouses, among other essential service provides on the front lines of addressing the crisis.”
The agencies are specifically looking to crackdown on employers and staffing services who may be tempted to collude with competitors to lower prices or draft overly burdensome restrictive covenants prohibiting the movement of employees between these service providers. The agencies promised to use the full extent of their power to impose criminal and civil liability on companies who knowingly use the guise of cooperation in response to the pandemic to engage in anticompetitive behavior like “unlawful wage-fixing and no-poach agreements, anticompetitive non-compete agreements, and the unlawful exchange of competitively sensitive employee information, including salary, wages, benefits, and compensation data.”
In connection with the recent guidance, FTC Chairman Joe Simons said, “Many American workers are under a tremendous amount of stress because of COVID-19, and that includes essential workers and first responders. We will not stand for any collusion among employers that would deprive workers of competitive compensation for their hard work.”
While the agencies are seemingly primarily concerned with companies’ conduct that violates federal antitrust laws, the agencies are poised to punish companies who engage in any illegal anticompetitive behavior. Given this recent guidance and layoffs and furloughs of employees that are affecting nearly every industry and sector of the economy, it is now more important than ever to ensure that non-competition agreements and other restrictive covenants executed with new employees comply with state and federal law.
When onboarding new employees or collaborating with competitors in the coming months, it is in your company’s best interest to seek legal advice from a trusted and experienced attorney to ensure compliance with the law. Hastily-made business decisions in the coming months could open your company up to previously unconsidered liabilities.