It is important for businesses to be aware that their obligations under competition law can have significant implications for them as employers too. This is particularly relevant when a business is (i) setting wages and working conditions for new and existing employees and (ii) putting in place policies on staff recruitment and retention. Earlier this year the Competition and Market Authority (the CMA) published guidance titled “Avoid breaking competition law: Advice for employers”. In this article, we highlight the key points of the guidance for employers.
What should employers watch out for?
UK competition law seeks to ensure businesses do not use anti-competitive practices. The main types of anti-competitive behaviour prevalent in labour markets include:
- No-poaching agreements: When two or more businesses agree not to approach or hire each other’s employees (or not to do so without the other employer’s consent).
- Wage-fixing agreements: When two or more businesses agree to fix employees’ pay or other employee benefits. This includes agreeing the same wage rates or setting maximum caps on pay.
- Information sharing: When sensitive information about terms and conditions that a business offers to employees is shared between businesses. This can reduce competition between those in recruitment and retention.
The guidance warns that agreements or practices do not need to be in writing to be illegal. They might take the form of informal practices (gentleman’s agreements).
Illegal agreements or practices are not restricted to employees and can cover freelancers and contracted workers as well as permanent staff.
How do employers avoid breaking competition law?
The guidance issued by the CMA suggests that to avoid anti-competitive behaviours employers should ensure they:
- understand how competition law applies to no-poaching and wage-fixing agreements;
- train HR and recruitment staff on competition law and how it applies to agreements within recruitment;
- have internal reporting processes in place so staff can report no-poaching agreements or wage-fixing;
- do not agree with a competitor to fix wages;
- do not agree with a competitor to avoid approaching or hiring each other’s employees;
- do not share sensitive information about their pay arrangements, business or employees with a competitor; and
- have solid internal reporting processes in place, and that staff are aware how they can use them.
What happens if a company breaches competition law?
A business found to have breached competition law could be subject to significant financial penalties of up to 10% of their annual worldwide turnover. Individuals participating in illegal collusion can also face disqualification, significant personal fines and imprisonment. This disqualification can last up to 15 years.
Any anti-competitive behaviours should be reported to the CMA. Reports can be made by calling the CMA on 020 3738 6888 or emailing cartelshotline@cma.gov.uk. The CMA can investigate businesses if there are reasonable grounds to suspect competition law is being broken. If a business has entered into a no-poaching or wage-fixing agreement, it can apply to the CMA for leniency. Leniency can be given to a business which has participated in anti-competitive behaviours, provided certain conditions are met. If the business comes forward with information about the cartel in which it has been involved and the CMA considers the conditions are met, the CMA can give the business total or partial immunity from fines. Individuals can also receive immunity from prosecution if certain conditions are met. The leniency rules are there to encourage businesses to come forward about anti-competitive practices.
