Hot topics in competition law: Risks and issues in labour markets

In recent years, competition authorities have shown an increasing interest in potential anti-competitive conduct in labour markets.

Authorities in several jurisdictions, including the UK, have issued guidance on compliance with competition law aimed at employers; they have also opened several investigations into suspect anti-competitive conduct relating to labour issues.

For charities and non-profit organisations, awareness of competition law may be low. But understanding these risks is crucial because the authorities have the power to impose large fines for breach of competition law, even on these types of organisations. A finding (or even an allegation) that an organisation may have breached competition laws will also generate negative publicity and have reputational consequences.

Key risks and issues

Competition law applies to all kinds of organisations engaged in economic activity, regardless of their legal structure or status, and this includes co-operatives, charities and non-profit organisations.  
Competition law issues in labour markets tend to fall under the prohibition on anti-competitive agreements. Three particular areas of concern have been identified by the UK Competition and Markets Authority as being of interest: no-poaching agreements; wage-fixing agreements; and information sharing.

No-poach agreements

No-poach agreements involve competing employers agreeing not to hire each other’s employees. This restricts workers’ mobility and can lead to reduced wages and career opportunities.

Wage-fixing agreements

Wage-fixing occurs when two or more competing employers agree to fix employees’ salaries, or agree salary increases or other benefits/conditions or bonuses. This can suppress salaries and limit competition. Wage-fixing agreements will be treated as form of “buyer cartel” by the competition authorities and could attract serious fines.

Information sharing

Where two or more organisations share confidential, sensitive information about their terms and conditions of employment, salaries, bonuses or salary increases this may be treated as a form of anti-competitive agreement by the competition authorities, as it can reduce uncertainty and therefore reduce competition between the parties. This can apply both to formal information exchanges and benchmarking exercises; and to less formal, irregular information sharing, perhaps between peers in the HR function of different organisations. 

It is important to understand that charitable organisations can be “competitors” on labour markets because they are competing to hire or retain the same talent, regardless of whether they see themselves as competitors in terms of their actual charitable activities or areas of focus. Coordinating conduct with a competitor or sharing sensitive information with a competitor will be a serious breach of competition law, and could be subject to fines of up to 10% of turnover. Directors may also face disqualification. Nor will it be a defence that the conduct was intended for altruistic purposes, such as ensuring that employees are paid fairly.

Compliance tips

Review employment practices

Regularly review your HR policies and practices to ensure they comply with competition law. Do you have regular formal or informal contact with others in your sector at which labour and employment issues are discussed? Do you participate in any regular information exchanges or benchmarking exercises that could involve sharing sensitive information or be construed as wage-fixing? 

Training and Awareness

Consider providing training for HR teams. Ensure they understand the implications of anti-competitive practices and how to avoid them.

Conclusion

Navigating competition law issues in labour markets can be complex, particularly where organisations may more inclined from a cultural perspective to work collaboratively to achieve common charitable goals. However, understanding and mitigating competition law risks is essential for charities and non-profit organisations to avoid the risk of serious fines and damage to reputations. 

The Mills & Reeve competition team can assist with competition law reviews and audits of any areas of concern, for example around information sharing or salary review and benchmarking processes. We have extensive experience of providing compliance training and guidance. If necessary, we can also advise on protective action, including making a leniency application to the Competition and Markets Authority.

If you have any specific questions or need further guidance, we’d be delighted to hear from you.

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