Labor Violations to Receive New Merger Scrutiny Via Agency Pact

Companies face potentially greater government scrutiny of their workforce practices as federal labor and antitrust regulators team up to cover enforcement blindspots.

The July 19 memorandum of understanding between the National Labor Relations Board and Federal Trade Commission outlines the agencies’ plans to collaborate on staff training, information sharing, and outreach and communication.

The Justice and Labor departments signed a similar agreement in March. Together, the moves advance the Biden administration’s push to address labor and competition concerns through the whole-of-government approach announced in an executive order a year ago. It also arrives amid mounting pressures on tech giants’ and gig economy companies’ handling of workers and contractors.

“Companies facing unfair labor practices or legal action can expect that there will be enhanced information sharing and potentially coordinated investigations or prosecutions where cases involve potential violations of labor law and antitrust laws,” NLRB General Counsel Jennifer Abruzzo said in a statement.

The agreement bridges a longstanding gap in the regulation sphere, allowing agencies whose responsibilities often overlap to finally coordinate their approach to enforcement. It unlocks possible collaborations, including better and more efficient investigations of unfair labor practices, and FTC merger reviews and resolutions that are informed by labor law.

The FTC, with which the Department of Justice enforces the nation’s antitrust laws, can now share with the NLRB some of the information contained in the thousands of pages it obtains from companies in the merger review process. The labor board could then scrutinize the documents—which it otherwise would not be privy to—for evidence of National Labor Relations Act violations like union busting, said Hiba Hafiz, a professor at Boston College Law School.

“Improving the government approach to competition begins with information sharing,” said Hafiz, who published a paper last year on interagency coordination. “It’s the first step to ensure more uniform enforcement measures in the context of abusive employers, collusive employers, and dominant employers.”

The FTC didn’t respond to a list of questions about its specific goals with the agreement.

Uncharted Waters

Information that could prove vital to the Biden administration’s mission to address increasing market concentration and labor violations has, until now, been siloed within the respective agencies. That’s prevented them from aggressively enforcing certain violations, Hafiz said.

While data collected from merger reviews can be used by the labor board to address unfair or illegal labor practices, the NLRB’s trove of enforcement compliance data can, likewise, inform the merger remedies brought by the commission, Hafiz said.

“For example, if two companies want to merge, and one has a bad history with union busting, that’s useful information for the FTC to know if it’s going to make an assessment about whether the merger will affect labor market concentration, and what the effects will be of the merged firm in the relevant labor market,” Hafiz said.

Unfair labor practices are also indicative of market power—the ability of a company to manipulate the price of an item or the level of wages, said Marshall Steinbaum, an economics professor at the University of Utah. Information from the NLRB could provide a concrete demonstration of the role of employers in the labor market, Hafiz and Steinbaum said.

The FTC could choose to aggressively go after proposed mergers between companies where there have been rampant labor abuses or where a merger is likely to reduce employers’ competition for labor, Hafiz said. That sort of focus has long gone into analyzing a merger’s impact on product markets but has been harder to achieve in under-scrutinized labor markets, Hafiz said.

But the question of whether the FTC could require companies to sign neutrality pledges, or promise not to use noncompete agreements or no-poach policies as a condition of merger approval, is “all uncharted waters,” Hafiz said. “There’s no law on this.”

And any remedy must be clearly drawn from a potential merger’s effects on labor market concentration and competition, Hafiz said.

Just the Beginning

The agencies’ agreement goes beyond information sharing when it comes to enforcement, said Benjamin Dryden, a partner at Foley & Lardner. It can address agency blind spots to certain types of illegal conduct, he said.

“It’s very easy for a trained antitrust lawyer to recognize per se illegal price fixing in documents, but it’s different for them to recognize union busting in a document,” Dryden said. “This is a mechanism for agencies to exchange evidence, but it also creates a platform for NLRB staff to educate FTC staff on what labor laws entail.”

Observers questioned how much the agreement could do on its own, however, without further agency follow-through.

“We have yet to see a ton of action, but I’m optimistic that this information sharing suggests more action will be forthcoming—either through rulemaking or enforcement,” said David Seligman, executive director of the nonprofit legal organization Towards Justice.

Abruzzo highlighted the skill-building elements of the partnership, saying both agencies are committed to cross-training staff on their respective laws so they can identify areas of collaboration and refer cases back-and-forth.

The agreement may also tee up agency action on restrictive covenants, like noncompetes, as the FTC highlighted in its news release.

“I will continue to issue guidance on cases involving interference with employees’ rights under the NLRA, including restrictions on workers’ ability to disclose information on wages and working conditions and restrictions on protected concerted activity involving worker mobility,” Abruzzo said.

Advocates for government intervention against worker misclassification in the gig economy heralded the agreement. Greater communication between the agencies could lend support for the idea that unfair labor practices, like misclassification, run afoul of antitrust statutes against unfair methods of competition, Seligman said.

But other advocates see the agreement as going even further. The anti-union National Right to Work Legal Defense Foundation in an email called the agreement “a partnership to help unions and their allies unionize gig workers.”