CMA warns HR to avoid anti-competitive recruitment practices

The Competition and Markets Authority, the CMA, has published new guidance for employers to help them comply with competition law when recruiting. The CMA sets out the legal obligations in relation to no-poaching agreements (where businesses agree not to hire each other's employees), wage-fixing agreements (where businesses competing for the same talent pool fix salaries), and sharing information about the terms and conditions of employees’ contracts. The guidance comes at time of increasing interest in, and scrutiny of, potential collusion between competitor employers in the UK, EU and US. We’ll hear from a competition lawyer about that.

HR Magazine reports on this with their headline ‘HR warned to comply with competition law when recruiting’. They quote Juliette Enser, CMA senior director of cartels, who says: “Human resource professionals have an important role to play in ensuring compliance with the law and make sure the businesses they work for steer clear of anticompetitive no-poach or wage fixing deals."

So, let’s get a view on this. Alan Davis is a competition lawyer and earlier he joined me by phone to discuss the new guidance and what HR should take from it. Clearly the CMS has felt the need to issue this guidance so I started by asking Alan how widespread is non-compliance: 

Alan Davis: “I think it's fair to say there's probably no smoke without fire. I think, first of all, there have been an increasing number of enforcement cases in other jurisdictions that have been fairly well publicised. So, in the US we've seen criminal enforcement cases, particularly in the tech sector, going back to 2010, 2011, for what they called ‘no cold call’ agreements between competitors not to poach each other's staff. There have been some new cases in the healthcare sector which have been initiated in the US which are criminal and they're sort of going on at the moment in relation to no poach and wage fixing agreements in that sector. We've also seen enforcement cases in France, Hungary, Portugal, and the Netherlands and then, of course, quite interestingly, we saw Margrethe Vestager, the European Competition Commissioner, make a speech at the end of 2021 in which she signalled that she was very interested in pursuing, as she called them, ‘no poach’ cartel cases, and I think that's very much in light of the fact that we continue to face a very tight labour market and certainly the European Commission has signalled that they regard the ability for employees, and workforce, to be able to move around as critical to innovation in the European Single Market and from a UK perspective the timing of the announcement is quite interesting. I suspect, as I said at the beginning, that there's no smoke without fire and it's quite possible that the CMA has received information about particular instances of no poach agreements that they've come across that have been reported to them through complaints or otherwise and, actually, this is a bit of a signal to the market that the CMA does intend to bring enforcement action in the future. So they're kind of giving industry a chance, if you like, to make sure that they're compliant.”

Joe Glavina: “This isn’t just relevant to UK businesses, there's an increasing interest in and scrutiny off potential collusion between competitor employer in the UK, EU and US, for example. Can you tell me more about that?” 

Alan Davis: “Well, as I mentioned earlier, there have been these enforcement cases which have been taken by the US Department of Justice in the tech sector particularly and also the healthcare market. They were very much around non-poaching, agreements not to solicit staff from competitor firms, and then, and I mentioned, we've also seen other cases. So for example, there was a 2017 case in France. There were flooring manufacturers fined 300 million Euros for a no poach agreement which involved exchange of salary information and this allowed them to coordinate strategy as part of a sort of wider cartel arrangement. Interestingly, in Portugal the Portuguese Competition Authority just last year took a case against Portugal's football league and 31 clubs about a mutually agreed prohibition on hiring players who had terminated their contract with another team and that was linked to reasons relating to the COVID pandemic, but it just shows you also that you can't necessarily use things like COVID as an excuse to overstep the mark in relation to competition law. In the Netherlands there was an alleged wage fixing agreement by supermarkets, and that’s been resolved, but I think these are all good examples of lots of different types of sectors in which these issues have arisen and I think it demonstrates that this is not confined, as it is in the US, to labour market where there's a huge amount of demand for specialist, high tech, individuals specialised in tech issues. This is across the board and, certainly, over the years we’ve provided a lot of guidance in the construction industry, in the hotels sector, where there are large numbers of employees where sometimes there's also a desire to for trade associations to get involved in helping with benchmarking and so on. So, in some industries there's quite good guidance that has been put in place around what can and cannot be done but this seems to be quite a live issue across lots of jobs of different sectors.”

The CMA’s guidance is very brief, so it won’t take long to read in full, and we do recommend HR professionals to read it. We have put a link to it in the transcript of this programme.

LINKS
- Link to CMA guidance for employers
- CMA press release CMA reminds employers to avoid anti-competitive practices - GOV.UK (www.gov.uk)