Be Mindful of Competition Risks in Hiring Practices

Employment Law Alert | May.07.2018

The Competition Commission has published an advisory to alert businesses of the competition risks associated with employment-related practices.

Competition between employers in the labour market leads to better employment terms and increased opportunities for employees. When, however, employers make arrangements with each other in respect of hiring practices and employee compensation, this may give rise to competition risks and contravention of the First Conduct Rule under the Competition Ordinance.

Under the First Conduct Rule, undertakings are prohibited from entering into agreements or engaging in concerted practices that have the object or effect of preventing, restricting or distorting competition in Hong Kong. "Undertakings" are broadly defined as any entity or natural person which is engaged in an economic activity. This includes individual companies, groups of companies, partnerships, individuals operating as sole traders or subcontractors, co-operatives, societies, business chambers, trade associations and non-profit organizations.

In its advisory, the Commission provided a number of examples of anti-competitive employment practices:

  • Wage fixing arrangement. Agreements or concerted practices between employers that relate to any aspect of employee compensation. Compensation includes salaries, wages, and benefits and allowances such as insurance benefits, housing benefits, relocation support, severance payments and long-service payments.
  • Market sharing arrangement. Agreements or concerted practices between employers that relate to poaching, solicitation, recruitment or hiring of each other's employees or classes of employees.
  • Sharing of employment-related information. Exchange or sharing of intentions between employers about any aspect of employee compensation or hiring of each other's employees.

Employers are warned to be mindful of the competition risks in their employment practices. In particular, they are to adopt their own hiring practices and independently determine the potential and existing employees' terms of employment, compensation and benefits.

The advisory is clear that if the Commission identifies arrangements between employers that have the object of harming competition, it will take enforcement action and businesses may face financial penalties and other sanctions.