Competing for talent

It is well understood that South African competition law has a key focus on issues of public interest, including protecting and advancing workers' interests. This focus on public interest is unique as the law recognises that the South African economy must not only operate effectively but should also serve to uplift South Africans.?

Competition authorities in the EU, US and Canada do not have similar legislative frameworks but this does not mean that they are blind to these public interest issues. Recently these competition authorities have sought to protect the interests of workers through critically assessing whether certain established human resources practices raise legitimate competition concerns in labour markets and require intervention in order to protect the interests of workers.?

A competitive labour market should achieve positive overall outcomes in terms of talent attraction and retention, fairer wages and salaries, better employment terms and benefits, and worker mobility.?Certain conduct by and between employers that impedes these outcomes may well be cause for concern. Internationally, the competition authorities in the EU, US and Canada have directed that wage-fixing agreements and no-poach agreements are problematic and, in some instances, outright illegal.?

We consider potentially problematic conduct within the labour market with reference to firstly employment terms (including salaries and wages); and secondly, worker mobility and choice.

1.????? Labour market conduct that influences employment terms

1.1.?? Wage-fixing agreements between companies to determine, cap or maintain wages, salaries, employee benefits or terms and conditions of employment are likely to be considered collusive price fixing that is outright prohibited. ?

1.2.?? Companies should be circumspect about sharing sensitive information on employment terms with others, as they could advertently or inadvertently engage in collusive conduct by relying on such information. Organisations often take part in and rely on employment benchmarking surveys to inform decisions on employment terms, and the transparency offered by these surveys offers pro-competitive benefits, although could cross a line if the information exchanged is too granular and specific.?

2.????? Agreements that impede worker mobility and choice

2.1.?? No-poach agreements in terms of which companies agree not to solicit or hire one another's employees may be viewed as collusive market allocation, especially if the talent pool is highly specialised and/or limited.?

2.2.?? Non-solicitation agreements, on the other hand, that are concluded for legitimate and justifiable commercial reasons (such as in the context of a joint venture or pursuant to a sale of business) will likely not fall foul of competition laws.?

In South Africa, a non-solicitation agreement is permissible provided that it is reasonable in terms of scope and duration and is not underpinned by a market allocation agreement. The Competition Appeal Court instructively determined the appropriate test to be whether, firstly, ignoring the impugned restraint provision, the main agreement would be questionable from a competition law perspective; secondly, the restraint is reasonably required for the conclusion and implementation of the main agreement; and thirdly, the particular restraint is proportionate to the purpose being served.

2.3.?? Restraints of trade/non-compete clauses agreed between an employer and employee should generally pass muster provided they are reasonable and justifiable. Notably, however, in the US, companies are banned from entering into or enforcing a non-compete clause except in limited and clearly justifiable instances involving senior personnel.

In South Africa a restraint of trade is enforceable if it is foremost reasonable in terms of geographic scope and duration; and further, is required to protect the legitimate commercial interests of the erstwhile employer from having its confidential information and trade secrets exploited to its detriment. ?

The South African competition authorities have not yet adopted express policies or guidelines in respect of competition in labour markets and, as the law stands, the assessment of the conduct discussed above is premised on an assessment of reasonableness and justifiability. This stands in contrast to the recently codified, prevailing positions in the EU, US and Canada. That said, the South African competition authorities are uniquely placed to be awake to issues impacting workers' welfare and can be expected to scrutinise these issues in detail once called upon to do so. ?

This article was prepared by Leana Engelbrecht .