The Competition and Markets Authority (CMA) has last month published new guidance seeking to debunk various myths that competition law does not apply to agreements between employers about wages or working conditions because these are “HR issues”.
The guidance serves as a timely reminder that competition law should not be overlooked when it comes to ways in which employers seek to recruit and retain workers, and the risks of ignoring the rules are potentially significant. Breaching competition law can lead to businesses being fined up to 10% of their annual worldwide turnover (among other consequences), individuals being sentenced to up to five years in prison and/or a fine, and directors being disqualified from managing a company for up to 15 years.
The guidance is called ‘Competing for Talent’, and it uses hypothetical and real-life examples to provide direction about what constitutes anti-competitive behaviour in relation to workers, what business can do to avoid breaking competition law, and the consequences of falling foul of competition law.
Potential Breaches of Competition Law
The CMA’s guidance identifies three main types of anti-competitive behaviour:
- Non-poaching agreements: When a business agrees not to hire or poach another business’s employees. This applies whether the arrangement is one-way or mutual.
- Wage-fixing: When a business agrees to fix pay, benefits or other terms and conditions of employment with another business competing for the same type of employees (for example, through industry forums).
- Exchange of competitively sensitive information: When businesses (including businesses that compete for talent) exchange information that is not readily publicly available and which is “competitively sensitive”. This is information that reduces uncertainty in a market and/or influences the strategic decision-making of the recipient. The guidance highlights particular examples of information exchanges between employers that are more likely to be problematic from an anti-competition perspective (including exchanges of information about current staff pay and future pay intentions).
What Employers Can Do
The guidance makes a distinction between non-poaching agreements and time-bound non-solicitation clauses (such as those that may be found in secondment or consultancy agreements). The guidance states that non-solicitation clauses should comply with competition law provided they are necessary and proportionate, in terms of duration, subject matter and geographical scope.
The guidance is also clear that, as far as competition law may apply to collective bargaining, “the CMA will not seek to enforce competition law whenever workers and companies buying their labour come together to reach a genuine collective bargain. This applies irrespective of whether the workers are employed or self-employed.”
Therefore, employers should be careful to think how competition law may intervene when agreements are being considered.
Takeaways
The guidance gives some helpful bullet points reminding businesses what they can do to avoid breaking competition law. For example, employers may want to consider the following steps to stay compliant with competition law:
- Train HR staff, especially those involved in recruitment and employee benefits, about how competition law applies to their work (including the labour markets and in the recruitment context).
- Review compliance policies with the CMA’s guidance in mind.
- Ensure there are strong internal reporting procedures in place, and staff are aware of how to use them.
- Refrain from engaging in the sorts of anti-competitive behaviour set out above.
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