American businesses are hiring at an unprecedented rate, which means they are changing how they engage and recruit new employees. This should be a boon to job seekers, but unscrupulous practices such as “no-poach” agreements can stall a promising career. Which is why the Joseph Law Firm fights so vigorously to stop them. Unfortunately, this illegal behavior is not confined to our country.
Firm economist/project manager Sofia Jordan recently visited her native Chile where she wrote for La Tercera about no-poach agreements, warning about their effects and calling on authorities to investigate and sanction them.
Below is a summary of her “Labor Market and Antitrust Economics” article:
One of Chile’s most important current challenges is to protect workers' rights and improve their employment conditions. Trade union movements have historically guarded these rights, but antitrust enforcement can offer a complementary path.
Like the U.S., Chile suffers the risk of no-poach agreements. In these horizontal agreements, companies agree not to hire their competitors' workers. This type of collusion has harmful, long-term effects such as suppressing wages and constricting workers' career trajectories.
In a competitive labor market, when a person receives an offer at a competing firm, they can use it to negotiate with their current employer, or they can accept it and switch jobs. Similarly, the employer can match the offer to retain its employee or choose to let them go. In either scenario, companies have disclosed key information about their pay structures that workers can use to negotiate better wages and employment terms. Because of this, competition for labor is necessary to allow the flow of information that allows workers and unions to have bargaining power.
When this type of labor competition is absent—as it is in no-poach agreements—employers do not need to raise their workers' wages to respond to the possibility of them leaving, since that potential outside option does not exist. Companies that artificially restrict job opportunities are engaging in intense anti-competitive behavior, which has damaging anticompetitive effects and should be sanctioned.
Many economists have empirically demonstrated that employers have market power to fix wages, which proves that workers are in a more disadvantaged position than originally believed. Thus, it is important that authorities investigate and sanction these types of agreements since they seriously harm Chile's workers. In addition, they also prevent people from having sufficient mobility to be employed in the positions where they are most efficient, which can result in products and services of poorer quality and less innovation.
The Joseph Saveri Law Firm is dedicated to protecting employee rights. Our robust class-action practice group is here to help. Click here to see our current Aerospace Engineer No-Poach Litigation and Medical Center Employee No-Poach Litigation.
For more information on no-poach agreements and what they mean for the economy, please contact Sofia Jordan, the firm's economist.