Are You a Pay Data Exchanging Scofflaw?

It seems innocent enough.  Just a little sharing of helpful information between trusted colleagues.  After getting pushback on engineering salary levels, you pick up the phone and call a fellow HR professional in your network whose company has similar positions and ask about their salary practices.  Naturally, in the spirit of kind reciprocity, you share back a little of what you're doing for these roles.

What could be wrong?

Can you say collusion?  Or illegal price-fixing?  How about wage theft?

Several conversations in just the past week have reminded me that few HR professionals (including, surprisingly, a number of compensation specialists) are aware that the conduct of both formal and informal (a la the phone call mentioned above) is regulated by the Sherman Anti-Trust Act of 1890.

Time out for a bit of history.  The Sherman Antitrust Act, named for its author, Senator John Sherman of Ohio, was original passed to limit monopolies and other restraints on commerce.  It is the Act's provisions on pricing and competition which impact those seeking information on compensation practices via salary surveys. 

Here's the bad news:  The U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC), the bodies with primary responsibility for enforcing our nation's anti-trust laws, have determined that organizations conducting their own salary surveys could be seen as practicing illegal price-fixing.  But here's the good news:  In an effort to provide guidance to HR and compensation professionals seeking to determine competitive pay levels while avoiding antitrust violations, the DOJ and the FTC have jointly published a series of Anti-Trust Safety Zone Statements, which have been interpreted  to provide a "safe harbor" for this exchange of information.

The DOJ/FTC Antitrust Safety Zone Statements are highlighted below for reference (note that these were initially developed with health care organizations and activities as their focus):

Antitrust Safety Zone: Exchanges of Price and Cost Information Among Providers That Will Not Be Challenged, Absent Extraordinary Circumstances, By The Agencies

The Agencies will not challenge, absent extraordinary circumstances, provider participation in written surveys of (a) prices for health care services, or (b) wages, salaries, or benefits of health care personnel, if the following conditions are satisfied:

1. The survey is managed by a third-party (e.g., a purchaser, government agency, health care consultant, academic institution, or trade association);
2. The information provided by survey participants is based on data more than 3 months old; and
3. There are at least five providers reporting data upon which each disseminated statistic is based, no individual provider's data represents more than 25% on a weighted basis of that statistic, and any information disseminated is sufficiently aggregated such that it would not allow recipients to identify the prices charged or compensation paid by any particular provider

The conditions that must be met for an information exchange among providers to fall within the antitrust safety zone are intended to ensure that an exchange of price or cost data is not used by competing providers for discussion or coordination of provider prices or costs. They represent a careful balancing of a provider's individual interest in obtaining information useful in adjusting the prices it charges or the wages it pays in response to changing market conditions against the risk that the exchange of such information may permit competing providers to communicate with each other regarding a mutually acceptable level of prices for health care services or compensation for employees.

Keeping a finger on the pulse of the pay market, particularly for hot skill jobs and in-demand talent, is an important and necessary part of managing a successful compensation program.  We simply have to make sure we're staying within the boundaries of the law when we do so.

Let's be safe out there!

Ready to become famous for getting results -- with your compensation programs? Then keep in mind that Everything You Do (in Compensation) is Communication -- and check out the book  written by Ann and Cafe cohorts Margaret and Dan.  Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force,  and Managing Partner of Altura Consulting Group LLC.  Ann also serves as past President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of the Advisory Board of the Compensation & Benefits Review.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.

Image "Woman Telling Something to Man" courtesy of ImageryMagestic/FreeDigitalPhotos.net

Comments

[Jacque Vilet]

I can remember years ago when "collusion" was taken very seriously especially in hot industries like high tech. I attended a well known high tech HR group meeting in CA. When the subject of pay came up and people started talking about various salaries for jobs, participants from one company got up and left the meeting. They said later they didn't want to give even the slightest appearance of participating in what might be construed as "collusion".

[Karen Kervick]

Even on an HR list serv moderated by a legal firm, people will ask the group about compensation for a specific role. I'm not too surprised because it was a group started as a resource for the small HR dept/ HR Generalist or Manager. Some HR professionals don't seem to be as aware of the ramifications of just asking around for rate comparisons. It seems harmless enough.

I worked for a healthcare organization that belonged to a local HR association, that started as an employee relations/benefits information sharing group before the internet age, who did a general wage survey every year. Problem was one of the members aggregated the information. When I became Compensation Manager, I said we could no longer participate. In order to continue the survey, my company which was a bit larger than the stand alone properties, offered to sponsor a third party survey. The 3rd party company charged a small fee per participant to recoup some of the cost. The cost was worth it to us to get local data while avoiding the collusion issue.

Of course, its okay for employees to talk to their counterparts about their rates, but not for employers to discuss them with their counterparts. Perhaps we can just ask our employees to discuss and report back to us! What do you think?

[Carla Wiliamson]

You also have to consider this aspect of information exchanges, Ann, as identified below by the FTC. So if your a small part of a large survey as defined below, for example, there is no need to get survey information that follows the guidelines.

"Absent extraordinary circumstances, the Agencies do not challenge a competitor collaboration when the market shares of the collaboration and its participants collectively account for no more than twenty percent of each relevant market in which competition may be affected."

http://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf

Also, if you share the salary of an employee with another colleague and receive information in exchange, and that is the extent of your sharing, there is little likelihood the somebody can claim you are a part of a conspiracy to suppress wages.

Also just because you exceed the safe harbor guidelines doesn't mean you have per se violated the law, as the Detroit nurses case shows.

http://www.leagle.com/decision/In%20FDCO%2020120323G41.xml/CASON-MERENDA%20v.%20DETROIT%20MEDICAL%20CENTER

[Ann Bares]

Jacque,

Interesting experience - thanks for sharing it. You'd think the recent legal action in Silicon Valley would be raising sensitivities again.

Karen,

Thanks for your comment and experience. Agree that it is typically worth it - both from a legal and simply a confidentiality standpoint - to involve an independent third party, particularly if costs can be spread across group members.

Yes, indeed a little ironic that employees can talk and HR pros cannot - but I appreciate that this is a regulatory step taken in response to the perceived imbalance of power.

Carla,

Interesting points and cases - thanks for sharing them and the links!

Appreciate the comments and conversation here!