Thursday, November 3, 2016

Are your Wage Surveys Illegal?


Maybe, if you’re not careful….

Ogletree Deakins has a report on the Department of Justice and the Federal Trade Commission releasing "advice" to HR professionals concerning certain practices – one of which is wage surveys.

While most employers know (or should know) that wage fixing is illegal, many may not understand that "no-poaching" agreements will also be considered a violation of anti-trust laws; the other two practices the advice contains.

I think the most impactful piece of the offered advice concerns wage surveys, though. Many companies conduct both formal (through a paid vendor) and informal wage surveys. Oftentimes, these surveys are conducted for particular geographic areas and even specific to a particular industry. They are not done to price-fix, but to determine their competitive stance in terms of wages and benefits. 

Businesses make a decision (either formally or informally) on whether they want their wages to be below market, at market, or above market. This decision is based on many factors including the company’s budget and resources, the nature of their workforce and the nature and number of their competitors. 

However, the DOJ and the FTC list several provisions of a wage survey that would NOT violate anti-trust laws:

  • it is managed by a neutral third party,
  • it involves relatively old information,
  • it includes information that has been aggregated to protect the identity of underlying sources, and
  • it aggregates enough sources such that competitors will be prevented from linking particular data to an individual source.
    Yikes! Following this advice would make many wage surveys virtually useless. "Old" data is relatively worthless – if you’re trying to determine if you’re competitive how does old data help you today? On the other hand, many wage surveys done informally involve small samples that may in fact, allow someone who cared to dig a little to determine what company it came from, and possibly even which employees the wages pertain to. 

    None of this is helpful to many small businesses who have absolutely no intent to fix wages among themselves, but only hope to make their business as successful as possible and as a result to continue to employ people.

    Circling back to the "illegal agreements", how many times have you been aware of businesses having an informal policy of not poaching from their nearby competitors? Or, how many times have you been aware of an exec placing an irate call to an exec at another company complaining they have been poaching employees? Yeah, it happens. Better think twice about that now. To quote the advice:

    "Such agreements are illegal regardless of whether they are formal or informal, oral or written, and entered into directly or through a third party. Moreover, even in the absence of oral or written wage-fixing and no poaching agreements, "evidence of discussions and parallel behavior . . . may lead to an inference" of an agreement."
    Finally, the two agencies appear to be encouraging (requiring?) HR professionals to report such activity to federal antitrust agencies. Will this be yet another instance of HR liability for business practices over which they may have no control?


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