A critical role of the compensation function of Human Resources is verifying the current salary program’s market competitiveness. Years ago, instead of purchasing published data, organizations would have dedicated staff contact competitors or other organizations deemed to be part of the market database, in order to obtain current & projected salary information such as average pay, range minimums & maximums, and planned salary adjustments. Many justified these actions by citing concerns of lag time in receiving information from published data. In this issue of Astronology®, we will review the impact of anti-trust laws and market pricing.
Some important background information from the 80’s and 90’s reveals the perils of organizations gathering salary data on their own.
In 1982, The Boston Survey Group would regularly compile and distribute salary data. While the data were coded to ensure confidentiality, codes were openly traded. Thus, competitors were able to share confidential salary information.
In addition, a lawsuit was brought by nursing groups against the Utah Hospital Association. The suit alleged that the Association, by identifying data provided by competitors in a salary survey, engaged in a form of price fixing outlawed by the Sherman Anti-Trust Act. In 1994, a consent decree was issued stating the hospitals were indeed in violation of the price fixing provisions of the Act and were ordered to stop. The same type of ruling affected the Connecticut Hospital Association. Additional rulings impacted Exxon and the Federal Reserve Bank of Boston.
The key issue is how conducting a salary survey became price fixing and a violation of the Sherman Anti-Trust Act. In 2016, the Antitrust Division of the Department of Justice released a guideline for human resource professionals with helpful insights:
“Sharing information with competitors about terms and conditions of employment can also run afoul of the antitrust laws. Even if an individual does not agree explicitly to fix compensation or other terms of employment, exchanging competitively sensitive information could serve as evidence of an implicit illegal agreement. While agreements to share information are not per se illegal and therefore not prosecuted criminally, they may be subject to civil antitrust liability when they have, or are likely to have, an anticompetitive effect. Even without an express or implicit agreement on terms of compensation among firms, evidence of periodic exchange of current wage information in an industry with few employers could establish an antitrust violation because, for example, the data exchange has decreased or is likely to decrease compensation.”
To better understand this issue and its implications, the guideline included a question and answer section that poised the following scenario:
“Question: I am an HR professional who serves on the board of our industry’s professional society. We are interested in determining current and future trends in industry wages. Can we distribute a survey asking companies within the industry about current and future wages?
Answer: It may be unlawful for you, a member of the industry, to solicit a competitor’s company-specific response to a wage survey that asks about current or future wages, or to respond to a competitor’s request to provide such information. In addition, it may be unlawful for the professional society to distribute company-specific information about past, current, and future wages. Competitors’ exchange of nonpublic, company-specific information about current and future wages may violate antitrust law, unless certain survey procedures are followed to mitigate the risk of competitive harm.”
Naturally, the next question raised is what can competitors do to gain market-based salary information that does not violate anti-trust laws. The guideline explains
“It is possible to design and carry out information exchanges in ways that conform with the antitrust laws. For example, an information exchange may be lawful if:
- a neutral third party manages the exchange,
- the exchange involves information that is relatively old,
- the information is aggregated to protect the identity of the underlying sources, and
- enough sources are aggregated to prevent competitors from linking particular data to an individual source.”
Access to instant market information will always be in demand. It can be difficult for Human Resources to explain and adhere to these anti-trust implications when a manger fears losing talented staff to a competitor. Here are some viable, proactive steps you can take now to obtain data and stay in compliance with the law:
- Work with local SHRM, WorldatWork, or other Human Resource organization chapters to offer confidential annual and quarterly “hot job” salary surveys, with the data compiled by a disassociated third party.
- Work with the local Chamber of Commerce or Industrial Association to develop a similar survey process.
- Invite competitors to meet with a disassociated third party to create a confidential survey group.
- Incorporate “new salary” questions into your exit analysis process to track where employees are going and for what salary level.
- Survey potential employees who reject offers to determine if salary played a part in their decision.
Many professional associations have recently communicated this anti-trust information to educate their membership, as well as to build their database for future litigation. All involved in the collection and use of market salary data must keep this in mind.
Are you considering hiring a third-party consulting firm to manage a survey for your association or industry group? Astron Solutions has a dedicated service for such needs! To learn more about our high quality, anti-trust compliant surveys, visit our website and view a live demo: https://astronsurveys.com/.