EU now enforces anti-competitive recruitment and poaching ban

On October 19, Margrethe Vestager, Executive Vice-President and Commissioner for Competition of the European Commission, delivered a speech on the current EU policy on cartels, potential changes to the Commission’s leniency program and recent raid efforts. Specifically, Vestager spoke of the so-called “no-poaching agreements,” whereby companies agree not to recruit other workers’ workers and / or set wages.

Vestager noted the evolution of cartels in recent years, with the emergence of buyer cartels, which differ in many ways from traditional pricing and market-sharing agreements. “No-poaching” agreements of this type will cover both agreements between companies or groups of companies not to hire other staff at all, or not to offer them more money to relocate and thus reduce greatly increase the likelihood of them leaving the ship. They can also negatively affect competition by preventing new businesses from entering markets where success depends on the ability to hire employees with the right skills.

By focusing on such agreements, the EU is following in the footsteps of the United States, which has been interested in recent years in anti-competitive practices by companies in the hiring of employees. As early as October 2016, the antitrust division of the US Department of Justice and the Federal Trade Commission issued joint guidelines for human resources professionals to alert them to the competitive risks present in the recruitment process.

Anticompetitive practices in hiring employees were only treated as civil offenses in the United States until 2016, and the first criminal cases of wage fixing and “no poaching” were brought. only in December / January 2020/21. Further criminal cases were brought in March and July this year for alleged violations of U.S. antitrust laws in conspiring to suppress competition for employee services and fix employee wages.

In these more recent cases, the therapist recruiting companies have agreed to lower the rates of pay for therapists and assistant therapists, the operators of ambulatory care centers have agreed not to solicit each other’s senior executives and the recruiting companies. health care have agreed to assign school nurses among themselves and to fix their salaries. Although, if proven, these are extreme examples of anti-competitive practices on the part of employers, our experience with competition regulators shows that enforcement begins with extreme cases and “easy wins”. to shake things up a bit (lose your first cases on the new legislation as the regulator does not start your message well) before dealing with less flagrant infringements. None of these recent cartel cases involved the archetypal ‘smoke-filled room’ where attendees agreed on prices and joked that it was just as good that regulators hadn’t installed. of microphones in the room (which in the famous case of the Lysine pet food additive cartel in 1998, they did), but while it makes some great headlines and a Hollywood broadcast – see The Informant! In 2009, which at least gave one of the subsequently jailed executives the consolation of being played by Matt Damon – it’s not a necessary part of the offense. Sharing information is enough to create a cartel.

Given the new interest shown by the EU in examining anti-competitive employment practices between companies, it can now be expected to begin to take a closer look at ‘no-poaching agreements and enforcement measures in the sector ”. The enforcement priorities of major antitrust law enforcement agencies tend to align, so it is likely only a matter of time before other agencies focus on these agreements as well. The UK Competition and Markets Authority may be no exception, Brexit notwithstanding, but it is to be expected that it will not be the first on this and will be monitoring how these unfold. principles on the continent before implementing its own rules. .

Joint guidelines issued by US authorities can also serve as a guide for businesses in Europe. More specifically, they specify that:

• agreements between employers not to recruit certain employees or not to compete on wages are illegal;

• sharing information with specific competitors on terms and conditions of employment may result in a violation of competition law; and

• it is possible to design the information exchange in a way that complies with competition law, for example by having a neutral third party manage it or by having sufficient sources to prevent competitors from linking particular data to an individual source (so nothing would prevent a company from contributing or relying on anonymized market data obtained through commercially available salary surveys, etc.).

Essentially, the guidelines treat terms and conditions of employment as pricing information. However, this approach presents a real difficulty because the employment conditions are not information purely “belonging” to the company, but also to the employee. How can an employee negotiate with a future employer if they don’t refer to their current salary and benefits? What is the interviewing company supposed to do? Take a file note to prove, in the event of an investigation, that the salary information comes from an employee of a competitor seeking employment (as opposed to a competitor seeking to fix the purchase price of labor. ‘artwork) ? Better to produce a contemporary file explaining why, if such is the case, its decision not to offer materially more than the current salary is a real market decision and thus limit the possibility for a regulator to claim that it is about the product of an express decision or tacit agreement with the former employer not to attract his staff with material increases.

This is the approach some businesses take when receiving pricing information from a customer’s competitors. Other companies will simply delete the data to avoid having to explain the situation to regulators. However, here the information comes directly from an employee of a competitor. What about statements such as an announcement from Company X that it is increasing its entry salaries to match the new scale set by Company Y? In another context, this could be equivalent to manufacturer X announcing that it is lowering its prices to correspond to the new scale set by manufacturer Y. The first questions a regulator would ask are where the “scale” comes from and why the company X corresponding to the prices of company Y, rather than going down.

Clearly there will be huge startup issues as you apply in this industry. These will need to be fought against the backdrop of potentially huge fines. Under EU competition law, companies can be fined up to 10% of their total worldwide turnover, although it is hoped that this will be reserved for the most severe cases. serious and deliberate. How the fines would be calculated would likely depend on the nature of the anti-competitive practice, its geographic scope, duration, and any leniency / mitigation or reduction in settlement. The European Commission also has very broad investigative powers that range from requesting information from companies to carrying out unannounced raids to gather evidence.