The Competition and Markets Authority (the “CMA”) has published new guidance for UK employers on how to avoid anti-competitive behaviour. The aim of this is to ensure staff are paid fairly for their work and can opt to move to another employer where pay and conditions are better. This serves as a reminder to employers of their legal obligation to comply with competition law and that collusion between employers in respect of employee pay, working conditions and the hiring of staff is illegal and can have severe consequences for both businesses and individuals. Penalties for businesses found to have engaged in anti-competitive behaviour may include fines of up to 10% of worldwide turnover and individuals found personally liable may face criminal sanctions including fines, imprisonment, and disqualification as a director.
The CMA identifies three main types of anti-competitive behaviours in labour markets, which they describe as ‘business cartels’:
- 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, such as agreeing the same wage rates or setting maximum caps on pay.
- Information sharing – sharing sensitive information about employee terms and conditions between businesses which can reduce competition in respect of recruitment and retention. Beyond written agreements, this includes informal verbal practices e.g. ‘gentleman’s agreements’. These agreements or practices can cover freelancers and contracted workers as well as permanent salaried staff.
To avoid engaging in anti-competitive behaviour, the CMA recommends businesses take the following steps:
- Do not agree with a competitor to fix wages.
- Do not agree with a competitor not to approach or hire each other’s employees.
- Do not share sensitive information about their business or employees with a competitor.
- Do understand how competition law applies to no-poaching and wage-fixing agreements.
- Do provide recruitment staff with training on competition law and how it applies in the recruitment context.
- Do ensure solid internal reporting processes are in place and that staff are aware of these and how they can use them.
Businesses should seek legal advice if they have entered into a no-poaching or wage-fixing agreement or are aware of any other possible breaches of UK competition law.
