Earlier this month, the Competition Markets Authority (CMA) released guidelines for employers to improve business compliance and legal obligations regarding employee pay, working conditions and recruitment.
In the UK, employers are required to adhere to competition law when determining wages, working conditions, retention and recruitment for new hires and existing employees. Being compliant with these laws will help ensure that employees are paid fairly and will have the freedom to seek other employment with better pay and conditions.
This acts as a reminder for employers to remain legally compliant and helps define the severe consequences of anti-competitive behaviours and illegal collusion between employers.
The CMA has highlighted three main types of anti-competitive behaviours that can be found in the labour market. They have also referred to these as examples of “business cartels”.
- No-Poaching Agreements
This happens when two or more businesses agree to not approach or hire each other’s staff, or not to do so without the other’s consent.
- Wage-Fixing Arrangements
This is when two or more businesses agree to fix wages or employee benefits, including agreeing to the same pay rates or maximum caps.
- Information Sharing
Sharing sensitive information between businesses, such as terms and conditions between employers and employees, can reduce competition. Some illegal practices are known as “gentleman’s agreements”, which refer to informal and illegal practices.
Recommendations for Employers
The CMA has recommended for employers and legal advisers of businesses follow specific steps. These include:
- Understanding competition law about wage-fixing and no-poaching agreements
- Not agreeing with competitors to fix salaries
- Not agreeing with competitors to approach or hire each other’s employees
- Not sharing sensitive information about their business with competitors
- Train recruitment professionals on competition law in the scope of recruitment
- Maintain a solid internal reporting process which will be able to be used by employees
Consequences of Breaching Competition Law
It has been noted that if a business has been found by a CMA investigation to have breached competition law, it could face significant financial penalties. The financial penalties may reach 10% of their annual global turnover. Consequences may last up to 15 years which can have serious impacts on businesses. Further, they have also mentioned that individuals may face personal fines for being involved in illegal collusion.
The CMA has also urged to anyone who has witnessed illegal practices to report the case to them. They have set up contact points which include their phone number and email. To further encourage compliance and reporting, they have also noted if the report leads to an investigation, the individual who reported it may earn a reward. Additionally, if a person reports a case that they were involved in, they may receive leniency for becoming a whistle-blower.
More detailed information on competition law and cartels can be found through this link.