HR issues in the spotlight: key antitrust tips
As antitrust regulators have become more active and aggressive in Asia, companies have stepped up their compliance efforts. As a result, companies and their employees have an increasing awareness of the key types of anticompetitive conduct to avoid, such as price fixing, market sharing and bid rigging.
However, less well known is that competition laws also apply to employment practices and can capture agreements between companies to fix employees’ compensation or other terms or to not poach each other’s employees, or sharing sensitive information about salaries and benefits.
This is not just a theoretical risk for companies. In practice, antitrust regulators around the world, including in Asia, are taking a greater interest in this area. In 2018, the Hong Kong Competition Commission published an advisory bulletin to raise awareness of the potential competition law risks that could arise in an HR context. Further afield in the United States, the Department of Justice has in recent years stepped up enforcement in this area.
The regulators’ concerns around employment practices are based on the underlying principle that employers should compete with each other in the procurement of labour by offering better employment terms and increased opportunities for employees.
In light of this increased enforcement appetite by regulators, this edition of our legal quick tips provides key best practice for human resources professionals, in-house practitioners as well as employees.
Tip 1: Do not enter into any form of agreement or understanding with another company to fix compensation and other employment terms
- Compensation in this context is not limited to salaries but also includes benefits such as bonuses, allowances or maternity leave benefits.
- Remember that the concept of an ‘agreement’ is very broad: it does not have to be in writing or even legally binding, but can be as simple as an understanding reached at an industry or social event.
- Also, be aware that this rule applies to companies you compete with in the labour market for talent and not just your competitors for products and services.
Tip 2: Do not enter into non-poaching agreements with competitors
- As a general principle, agreements between competitors not to solicit or hire each other’s employees – so-called non-poaching agreements – restrict the mobility of employees moving between competitors and are considered a form of market sharing that is prohibited.
- There may be instances where a non-poaching agreement is justifiable and permitted, for example in an M&A context, provided the restriction is reasonable in scope and duration and directly related and necessary for the transaction to take place. In all cases seek legal advice before entering into any such agreements.
- The use of non-compete provisions in employment contracts (for example where an employee agrees not to work for a competitor for a period of time following termination of their contract) may be permitted provided that the employer has a legitimate business interest to protect, the restrictions go no further than is necessary to protect those business interests, and the restrictions do not relate to expertise that is in very limited supply.
Tip 3: Do not exchange sensitive information about compensation and other employment terms with another company
- Sharing of sensitive information between employers about current or future intentions in terms of employee compensation and other terms may give rise to competition concerns.
- This applies:
- whether the sharing of information is directly between employers or is shared via a third party, such as a trade association or industry consultant; and
- whether the sharing of information is reciprocal or one-way only – in other words, where one employer discloses information and the other remains simply ‘in listening mode’.
- Particular caution should be exercised in relation to sharing information about future intentions.
Tip 4: Take care when participating in industry events and salary surveys
- It is important to be extra vigilant when taking part in industry events. Employers should avoid sharing sensitive information as to their future intentions, in particular with respect to employees’ salaries and benefits.
- Employers should only participate in salary surveys where the survey is undertaken by an independent third party and provide sufficiently historic, anonymised and aggregated information to the survey provider.
- Check the survey provider’s policy and protocols to ensure they are antitrust compliant. In particular, ensure that the information to be included in the survey results:
- is historic, anonymised and appropriately aggregated; and
- comprises enough sources to prevent reverse engineering.
Tip 5: When conducting due diligence in an M&A context, make sure appropriate safeguards are put in place before disclosing or accessing sensitive HR information
- As a seller, ensure appropriate safeguards are in place before disclosing compensation information regarding key employees of the target business to any trade competitor(s).
- Such safeguards include one or more of the following:
- de-sensitising the information, for example by aggregation or redaction;
- limiting disclosure of the information to designated people, for example by way of a clean team arrangement; and
- holding back particularly sensitive information until a later stage, for example when a preferred bidder has been selected and the transaction is close to signing.