Competition watchdogs watch labour markets closely

HR professionals are often not included in competition law compliance programmes and training opportunities. That has to change, and this is why.

Commissioner Vestager made it clear in October 2021: “when companies collude to fix the wages they pay, or when they use so-called “no-poach’ agreements as an indirect way to keep wages down, restricting talent from moving where it serves the economy best,” such practices may be considered – in competition law terms – as “a buyer cartel” on the labour market. And indeed, in recent years, competition authorities have strongly increased antitrust scrutiny on developments in the labour market related to wage-fixing and no-poach practices – areas which, until recently, did not appear to be a concern.

HR professionals and their companies should revise their hiring and retention policies, protect the company’s sensitive information about employee compensation or benefits, and refrain from entering into any kind of anti-competitive agreements.

Practices being targeted

The main concerns relate to, on the one hand, wage-fixing agreements by means of which competitors harmonise or standardise the compensation and/or other benefits offered to their employees. Such wage-fixing agreements could be perceived under competition law as price-fixing cartels. Similarly, the exchanging of information between competitors regarding wages may result in competition law infringements. On the other hand, through “no-poach” agreements, companies agree not to contact, recruit and/or hire people who work and/or have worked for other companies that are a party to the agreement – which eliminates real competition between companies to attract employees, creating artificial barriers on the market, lowering labour force mobility and keeping the labour force captive.

Such agreements often affect high-profile employees with a specific skill set for which there is high demand. As the recent enforcement activity illustrates, industries or business areas including high tech, software engineering, animation, sports, pharma and healthcare have been under investigation. 

Competition authorities would tend to focus on “naked”, stand-alone, wage-fixing or no-poach agreements. By contrast, clauses or agreements ancillary to larger business deals in the context of M&A transactions or R&D agreements are generally not seen as problematic where they can be justified as directly related to and necessary in the context of the transaction. Also, agreements entered into within the existing legal framework for collective labour agreements on employment conditions are outside the scope of competition law. In that context, reference can also be made to the European Commission’s guidelines of September 2022 on collective agreements by solo self-employed individuals, which clarified when the latter may collectively negotiate better working conditions without breaching competition law.

Enforcement in Belgium

A couple of investigations into labour markets are pending before the Belgian Competition Authority. The watchdog also made it clear, in its most recent communication of enforcement priorities, that more resources would be allocated to new challenges such as competition in the labour market and that no-poach agreements would be closely examined – notably in the sports sector, but we understand that other sectors are also under review.

In view of the recent increased scrutiny of labour markets at the global, European and Belgian levels, it is important that companies actively conduct sanity checks of their HR, hiring and retention policies. Particular caution is called for when it comes to any form of cooperation with competitors which could result in limiting wages or in weakening the competition for hiring employees.