Recent Treasury Department Report Emphasizes Fostering Competition in Labor Markets

Persevering with the current string of actions throughout the Biden administration in response to the July 2021 Govt Order on “Promoting Competition in the American Economy,” on March 7, 2022, the US Treasury Department (Treasury) launched a report titled “The State of Labor Market Competition,” and on March 10, 2022, the US Departments of Justice (DOJ) and Labor (DOL) introduced a Memorandum of Understanding (MOU) to strengthen and coordinate enforcement efforts in labor markets. These developments spotlight the administration’s persevering with concentrate on anticompetitive conduct in the labor markets at each the native and nationwide ranges and warrant cautious consideration by employers of all sizes and in all industries.

Treasury Report In Depth

  • Treasury’s report units out to “summarize the prevalence and impact of uncompetitive firm behavior in labor markets.”

  • It focuses on each inter-employer conduct—such because the sharing of wage data, getting into into no-poach agreements and outright conspiracies to repair wages—and employer-employee conduct—like forcing staff to signal non-compete agreements, obligatory arbitration agreements and sophistication motion waivers, misclassification of workers as impartial contractors and opacity surrounding workers’ compensation charges—as being probably anticompetitive and contributing to the imbalance of energy between employers and workers in labor markets.

  • The constructions of assorted labor markets, together with general low charges of unionization, “fissuring” of workplaces as all kinds of job features (e.g., janitorial or meals providers) are outsourced from in-house workers to exterior contractors, and occupational licensing necessities imposed by federal, state, and/or native governments, are highlighted as having general unfavorable results on the competitiveness of assorted labor markets.

  • The report estimates that employers’ market energy is accountable for roughly 20% decrease wages in contrast to a completely aggressive labor market, and notes that the harms that circulation from an absence of labor market competitors disproportionately impression lower-income occupations, girls and other people of coloration.

  • The report concludes by emphasizing that antagonistic results on staff because of restricted competitors in labor markets have broader results on the labor markets, the companies that take part in them and the financial system as a complete.

  • Lastly, the report particularly examines the labor markets in the healthcare, agricultural and minor-league baseball industries, and it outlines the Biden administration’s efforts to extend competitors and deter and punish anticompetitive conduct in labor markets throughout the nation.

The Memorandum of Understanding (MOU)

  • The DOJ and DOL’s MOU likewise emphasizes the shared “interest in protecting workers who have been harmed or may be at risk of being harmed as a result of anticompetitive conduct,” as Assistant Legal professional Common Jonathan Kanter famous in the joint press release asserting the MOU, “[p]rotecting the right of workers to earn a fair wage is core to the work of both our agencies, and it will continue to receive extraordinary vigilance from the Antitrust Division.”

  • The MOU states the DOJ’s and DOL’s intent to “share enforcement information, collaborate on new policies, and ensure that workers are protected from collusion and unlawful employer behavior.”

Key Takeaways

The Treasury report focuses on a number of methods in which employers’ market energy in the employment market is hypothesized to provide unfavorable impacts on labor market individuals, together with:

  • Data sharing and agreements between employers;

  • Restrictive employment insurance policies resembling non-competes and arbitration agreements; and

  • Misclassification of workers as impartial contractors.

With these because the motivating forces, employers ought to anticipate there’ll possible be higher numbers of enforcement actions dropped at problem these practices in the long run.

Data Sharing and Agreements Between Employers

Whereas data sharing or inter-employer agreements can have reputable, pro-competitive functions, employers—particularly giant employers and employers of highly-skilled or specialised workforces—ought to anticipate that these kinds of preparations will obtain elevated scrutiny going ahead.

These practices can take varied types, starting from participation in commerce affiliation or trade surveys on worker wages, advantages or situations of employment to no-poach agreements or, in the acute, agreements between completely different employers to set the wages to be paid for various classes of workers.

Restrictive Situations of Employment

There can likewise be legitimate causes for an employer to wish to defend commerce secrets and techniques, mental property, buyer lists and the like via the usage of non-disclosure, non-compete or different restrictive covenants ancillary to an employment settlement. Nevertheless, the potential for these kinds of agreements to have chilling results on worker mobility can also be more likely to outcome in elevated scrutiny from federal regulators.

The probability of presidency investigations and enforcement actions is increased in reference to less-specialized employment, the place a connection to a reputable curiosity in defending the employer’s mental property grows extra attenuated, and the place the restrictive situations are much less narrowly-tailored to defending the procompetitive pursuits of the employer, resembling with non-compete clauses which might be probably limitless in time or geography.

Additionally it is possible that obligatory arbitration and sophistication motion waiver clauses will face heightened scrutiny in the long run, reflecting a rising hostility to these varieties of clauses in the employment context.

Misclassification of Staff

The observe of erroneously classifying workers as impartial contractors, referred to as out in the Treasury report as a observe by which employers offload legal responsibility for tax and profit prices onto the misclassified workers, is one other space that’s more likely to obtain elevated scrutiny by regulators, particularly in mild of the MOU coordinating the enforcement efforts of DOJ and DOL.

What This Means

The marked shift in the Biden administration’s angle in the direction of the labor market as rife with anticompetitive conduct is evidenced by its willingness to endorse financial literature that helps regulation of employers’ practices in the labor markets. Consequently, employers ought to anticipate elevated scrutiny on their employment practices in the years to return.

  • Employers can anticipate higher regulatory scrutiny even the place employment practices had not raised purple flags for regulators in the previous, the place employers aren’t “large” relative to different employers in the labor market, and the place labor markets are perceived to be extremely aggressive for the employers truly collaborating in the day-to-day hiring course of.

  • Employers needs to be particularly cautious of sharing data or getting into into agreements with different competing employers, as these kinds of practices can result in pricey and time-consuming authorities investigations, to not point out the potential for follow-on personal litigation.

Employers can handle the enterprise dangers posed by this elevated emphasis on competitors in the labor markets, in session with expert antitrust and labor counsel, by:

  • Implementing sturdy compliance packages that embrace coaching for HR workers, firm executives and different workers with roles that might contain interplay with opponents, to make sure that they’re educated on the correct scope and limitations of conduct in terms of worker recruitment and competitor interactions;

  • Participating in periodic reevaluations of their labor and employment agreements, practices and insurance policies to make sure that any significantly dangerous insurance policies, resembling restrictive covenants in employment agreements, are narrowly-tailored to guard the employer’s reputable pursuits whereas not being overbroad in order to ask regulatory scrutiny or litigation; and

  • Guaranteeing that the corporate’s strategy to classifying staff as both workers or impartial contractors is in line with the relevant authorized requirements.

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