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Counseling the HR Department – A Look at Benchmarking

Michael Wise

Counseling the HR Department – A Look at Benchmarking
Peter Dazeley via Getty Images

Recent antitrust enforcement in the United States has focused on labor and employment issues, which have not historically been a key area of focus for the Department of Justice and Federal Trade Commission. In one interesting example of this trend, the DOJ filed a civil complaint against several poultry processors and a data consulting firm, alleging that they had conspired to exchange wage and benefit information in an effort to suppress worker compensation. According to the DOJ’s press release, the action “puts companies and individuals on notice: the Antitrust Division will use all of its available legal authorities to address anticompetitive conduct that harms consumers, workers, farmers and other American producers.”

Subsequently, in February 2023, the DOJ withdrew a series of policy statements that provided safe harbors for certain categories of information exchange in the healthcare sector, describing the prior guidance as “overly permissive on certain subjects, such as information sharing, and no longer serv[ing] their intended purposes of providing encompassing guidance” on antitrust issues. While the guidelines themselves focused on healthcare specifically, the principles had been accepted across other industries to justify information sharing practices such as benchmarking, so long as the data was being aggregated by a third party, there were a sufficiently large number of contributors, and the data was historical.

Following this and other recent statements by antitrust enforcers, many companies have wondered whether they face latent antitrust risks stemming from their human resources department. Often, the members of human resources teams are not subject to the same levels of antitrust training as their co-workers in other parts of the company. As a result, they may be less sensitive to the sorts of information exchanges that would raise concerns in other areas of the business. It seems this is particularly true when considering the use of benchmarking, which is quite common in many human resources departments to determine appropriate salaries and benefits for employees.

When it comes to benchmarking, many companies have considered whether it is safe to participate at all given the recent governmental posture. In most cases, however, a complete ban on use of benchmarks would go beyond any concern that the DOJ and FTC have identified. Instead, it remains the case that benchmarking becomes problematic where the participating companies would somehow use it to dampen competition for employees, resulting in lower wages or reduced benefits being offered. In order to assist companies in evaluating where to draw lines, we have developed a few general antitrust principles that can be used to train human resource professionals and guard against antitrust concerns.

First, companies should have a policy for review and approval of sources of data to be used for benchmarking. This involves vetting the data provider and ensuring that the data being received is appropriately anonymized and historical. It should also confirm that the data being provided (if any) is appropriate and not unnecessarily sensitive given the context. This will almost always be a function of the legal department or outside attorneys in the first instance.

Second, companies should have policies around the use of benchmarking data, clearly specifying that the company makes its own decisions independently about setting rates, prices, salaries and benefits. Employees should be trained that while the data can be a helpful tool, it is always the company’s responsibility to make a final decision – as opposed to merely setting rates based on a third party data set.

Third, companies should train employees not to misuse benchmarking data. One common issue that comes up in this regard occurs where an employee decides to contact a counterpart at another company to check on a data point, confirm something, or see if the other company has contributed to the survey. Generally speaking, any type of confirmatory contacts with competitors (especially including companies that might hire from the same talent pool) should be prohibited.

These general guidelines on benchmarking should supplement other key antitrust principles, including the concept that it is never acceptable to agree with another employer on the wages or salaries that each will offer or their associated benefits packages. A proactive approach to these issues is critical in order to mitigate antitrust risks in the current environment.

This article was prepared by the Antitrust Law Section's Compliance and Ethics Committee.