Legal

What HR needs know about competition law

29 Nov 2018 By Matthew Hall

Competition law is more applicable to an HR professional’s role than many imagine – which means there are potential pitfalls they should be aware of. Matthew Hall reports

Most HR professionals will be aware that competition law (‘antitrust’ in the US) bans price-fixing cartels and companies are regularly fined for such activities. However, the law applies much more widely: any type of collusion between competitors or simple exchange of commercially sensitive information with a competitor gives rise to concerns.

The penalties for infringements can be severe. In addition to corporate fines, these include individual fines, imprisonment, private damages claims against companies and unenforceability of contracts, not to mention reputational issues. 

The impact of antitrust/competition law on the HR field is a big focus in the US and this is spreading to other regions and countries, including the EU/UK. Given this and the significant personal and corporate penalties which can arise from infringements of the law, it is incumbent on HR professionals to have at least a basic understanding of the principles. 

The highest-profile employment-related cases to date have involved agreements among employers not to recruit certain employees or not to compete on terms of compensation. Where your firm competes with another to hire employees of any type, those types of agreements will usually be illegal. This extends to no poaching, no cold call, no solicitation, no counteroffer, ‘notification of offer’ and no recruitment agreements. It also includes colluding on wages, wage ranges, wage increases, caps or benefit levels or types. 

This can be the case even if the companies are in different industries; all firms need IT staff and therefore often compete for the same people, regardless of the products or services they sell to their own customers.

It does not matter whether the agreement is informal or formal, written or unwritten, spoken or unspoken. Virtually no cartel-type arrangements are based on written agreements and regulators and courts regularly rely on very limited items of evidence to demonstrate collusion. 

Another key risk area affecting HR professionals concerns sensitive commercial information. Sharing information with competitors about terms and conditions of employment, prospective and current wage information or other sensitive employment-related issues can also run afoul of competition law. In the EU/UK, this can be seen as a type of cartel, even if the ‘exchange’ is one-way and takes place in just one meeting.

The range of activity potentially caught will be surprising. For example, on 26 September 2018, Ryanair issued a press release in which it alleged that its business was being damaged by unnecessary strikes and disruptive interference in its union negotiations, promoted and coordinated by competitor airline employees, their unions and lobby groups. Ryanair called on the European Commission to investigate this alleged behaviour by its competitors under competition law.

HR professionals do not need to become experts in this area, but they should be aware how competition law applies to their roles and should seek legal advice if they have questions. Companies should also review and, as necessary, revise policies on HR-related information sharing, hiring and solicitation, as well as compliance procedures and safeguards, to prevent violations. This should include training not only for HR professionals, but all staff that have any involvement in hiring and compensation decisions, including senior leadership.

It’s also good practice to implement reviews of third-party contacts. HR professionals should require that formal and informal HR groups the company belongs to or wants to join are reviewed for competition law compliance. Do not assume that because a group contains high-level HR professionals that they know the competition law ‘rules of the road’. In addition, a competition law review of ‘benchmarking’ or information- sharing requests on HR topics should be undertaken prior to your company participating in them.

Finally, be suspicious: take note if you hear ‘everyone else’ in your industry has similar employee hiring, employee solicitation or HR-related information sharing practices. This could be an early warning sign of potential issues and, through ‘whistleblowing’ laws, it may be possible to protect your organisation by raising concerns with a regulator at an early stage.

Matthew Hall is a partner in McGuireWoods’ London and Brussels offices, focusing on antitrust/competition law

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