Competing for Talent: The UK CMA’s Guidance on Anti-competitive Recruitment Practices

The UK’s Competition and Markets Authority (CMA) published detailed guidance on how UK competition law applies to certain human resources (HR) practices, focusing on what UK businesses “need to know when recruiting workers and setting pay and other working conditions.” The guidance follows trends set by other jurisdictions’ competition authorities focusing on anti-competitive behaviour between businesses in labour markets and builds on the CMA’s previous advice on how employers can avoid anti-competitive behaviour (published in February 2023).

What Does the Guidance Say?

The CMA’s guidance is intended to be a user-friendly guide on what it considers “businesses can do to avoid breaking the law when working to recruit and retain workers.” The guidance is aimed at anti-competitive behaviour between businesses and makes use of real-life and hypothetical examples to illustrate the CMA’s concerns.

There are three types of anti-competitive behaviour in labour markets that the CMA guidance focuses on:

• No-poaching: Businesses that agree with other businesses to not hire, poach, or solicit another business’ employees. The CMA draws a distinction between instances in which businesses agree or decide “not to approach or hire another business’s employees without the other business’s consent” (which would constitute anti-competitive behaviour) and non-solicitation clauses in certain types of commercial agreements such as secondment or consultancy agreements (in which suitably drafted clauses are permissible provided they “are proportionate to the overall objectives of the agreement”).
• Wage-fixing: Businesses that compete for the same types of employees that agree with those businesses “to fix pay, benefits or other terms and conditions of employment.”
• Exchanging competitively sensitive information: Businesses that exchange information that is “competitively sensitive” with other businesses (even if any information disclosure is done on a unilateral rather than reciprocal basis). The CMA acknowledges that certain information exchanges are less likely to be problematic than others. For example, companies benchmarking salaries via a third party or using public data provided the information in each case is sufficiently anonymised and aggregated is less likely to be problematic compared to companies that have a bilateral exchange of future pay intentions (which is more problematic).

What About Collective Bargaining Agreements?

Helpfully, the guidance explicitly addresses collective bargaining agreements (i.e., agreements negotiated between an employer or a group of employers with one or more workers’ organisations for the purpose of determining working conditions of certain workers), recognising that these are legitimate tools in labour markets that promote good working relationships and fair outcomes. The CMA has clarified that it will not seek to enforce competition law whenever workers and companies “come together to reach a genuine collective bargain.”

Does the Guidance Change Much?

The guidance reflects the CMA’s increasingly robust stance on competition law enforcement in labour markets and marks its most detailed statement on this topic to date. It also provides useful clarity on the types of conduct the CMA will scrutinise and what it regards as labour market collusion. More broadly, the guidance aligns with a growing global regulatory trend, including from the European Commission, to police potentially anti-competitive behaviour in labour markets.

The guidance also addresses the consequences of breaking the law, noting that businesses that do may be “fined up to 10% of their annual worldwide turnover and ordered to change their behaviour” and individuals who engage in cartel activity may be sentenced to up to five years in prison, disqualified from being a director, and/or subject to a fine. These penalties are consistent with the CMA’s broader enforcement powers and demonstrate a renewed focus on labour markets as an area of scrutiny.

The CMA’s guidance dovetails with successive governments’ focus on employment law reforms aimed at encouraging employee mobility and business innovation (including potentially restricting the enforceability of noncompetes in employment agreements). While specific proposals are yet to be proposed by the UK government in relation to restrictive covenants in employment agreements, evidently businesses reviewing their hiring practices will need to be mindful of multiple enforcement authorities and regimes.

Practical Considerations

Companies in talent-intensive sectors should update compliance policies, train HR and legal teams, and avoid any agreements — even informal — that restrict hiring from competitors. Only narrowly tailored, objectively necessary no-poach clauses ancillary to legitimate collaborations may be defensible and, even then, only in strictly limited circumstances. In summary, businesses’ HR teams need to assess their recruitment practices from a competition lens (and not solely with employment law considerations in mind).

While a number of anti-competitive practices highlighted in the CMA’s guidance will be clear to businesses, additional care will need to be taken when, for example, sharing or receiving potentially competitive sensitive information. In particular, the interactions HR professionals, recruiters, and senior management have with their peers in professional networks and industry forums (even on an informal basis) could result in the exchange of competitive sensitive information (and, as a result, breaches of the CMA’s guidance).

Employers ensuring their hiring policies comply with the CMA’s guidance — that staff are properly trained to identify potentially anti-competitive practices and appropriate systems are in place (e.g., whether under new or existing whistleblowing procedures or reporting channels) for employees to raise concerns regarding anti-competitive practices — will help mitigate the risk of the CMA taking enforcement action.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.