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What benefits does an open, competitive labour market provide, and why shouldn't employers negotiate among themselves regarding employees' working conditions? Answers to these and other questions are provided in the guidance which the Competition Council has sent to the most important organisations that unite employers and employees.

Companies must compete not only by selling or acquiring various goods and providing services but also by seeking to attract or retain employees. Agreements among employers not to compete for employees' working conditions, such as not hiring each other's staff or agreeing not to increase wages or provide other benefits, as stated in the guidance, can significantly restrict competition.

Such agreements primarily have a negative impact on employees: their opportunities to negotiate higher wages and more favourable working conditions diminish and the chances of individuals finding a job that aligns with their interests and abilities decrease.

Companies are prohibited from restricting competition in the labour markets, even if this is aimed at reducing operating costs, which may be relevant to the Lithuanian economy during a recession. While an agreement between companies on, for example, fixing wages may reduce costs in the short term, in the long run, the participants in such an agreement will not be able to increase production or develop innovations necessary to establish themselves in new markets or implement expansion plans in markets where they already operate. Consequently, consumers may lose the opportunity to purchase more innovative and higher-quality products from these companies.

"A competitive labour market in which employers compete for employees by offering them the most attractive working conditions ensures employees mobility, enhances their bargaining power, and provides opportunities to obtain better wages. It also encourages employers to invest in human capital. The position of companies in the market, the range of goods and services offered, quality, price, implemented innovations, and their scope depend on how well employers can attract and retain qualified employees," said Irma Urmonaitė, Deputy Chairperson of the Competition Council.

The guidance also present examples of agreements that restrict competition in labour markets, explains how to avoid them, what employers should do if they are about to be involved in illegal agreements regarding employees, and what to do if they become participants in a prohibited agreement or become aware of such an agreement.

The document reminds that employers who enter into such agreements may face fines of up to 10% of their annual worldwide revenue, and company executives may be held personally responsible, with their right to hold managerial positions restricted for up to five years and an additional fine of up to 14,481 euros imposed.

Restrictions on competition in the labour market are one of the sectoral priorities of the Competition Council. The Authority aims to detect or prevent infringements by educating business community about the prohibitions provided in the Law on Competition.

Last updated: 23 06 2023