In a recent decision dating from July 2024*, the Belgian Competition Authority (“BCA”) has fined three private security firms—Securitas, G4S, and Series—EUR 47 million for engaging in anticompetitive practices, including no-poach agreements that prevented the companies from hiring each other’s employees. The BCA’s ruling marked the first time it has classified no-poach agreements as restrictive by object, meaning that they are inherently harmful to competition. A few months later, in September 2024, the BCA conducted dawn raids at the premises of companies in the passenger transport sector by bus and coach. Based on the available information, these companies are suspected of engaging in, amongst other things, non-poaching practices.
Both events exemplify the increasing scrutiny of such practices under competition law. As no-poach agreements continue to attract significant attention from both national competition authorities and the European Commission (“EC”), it is crucial for companies to ensure compliance with the relevant regulations to avoid penalties.
No-poach agreements from a competition law perspective
In recent years, restrictive practices in the labor market, especially no-poach agreements, have come under investigation by national competition authorities and the European Commission. The EU Commission has, for example, recently performed unannounced inspections at the premises of Delivery Hero and Glovo to examine potential no-poach agreements in the online food delivery sector. Moreover, in 2024, the Portuguese Competition Authority fined a large technology consulting company EUR 278.000 for concluding no-poach agreements. The same authority imposed a fine of EUR 11.3 million on 31 Portuguese football clubs for engaging in no-poach agreements.
No-poach agreements prevent companies from hiring each other’s employees, often targeting high-profile staff. These agreements come in various forms. In “no-hire” agreements, employers agree not to hire employees from the other parties involved, whether actively or passively. In “non-solicit” or “no-cold-calling” agreements, employers agree not to actively approach another company’s employees with job offers.
Undertakings may have genuine business reasons to engage in no-poach agreements, such as preventing the loss of valuable employees, reducing the costs associated with recruiting and training new staff, or protecting non-patent intellectual property rights. Nonetheless, competition authorities may qualify no-poach agreements as a form of market-sharing cartels as prohibited under Article 101(1) of the Treaty on the Functioning of the European Union. More specifically, the EC and national competition authorities, including the BCA in its recent decision, have considered no-poach agreements as “restrictive by object”. This entails that such agreements are inherently anticompetitive and harmful to competition by their very nature.
Competition authorities adopt such a strict stance towards no-poach practices as they believe that the agreements limit competition between employers and workers’ mobility. In this regard, authorities established that these agreements, often kept secret from employees, typically result in lower wages since companies no longer need to offer competitive salaries to retain or attract talent. The secrecy also prevents employees from negotiating compensation for their reduced future job prospects. Additionally, productivity, quality, and innovation arguably suffer as these practices would hinder the efficient allocation of skilled employees to the most suitable firms.
How to ensure competition compliance in employee hiring and retention practices?
Given the numerous ongoing investigations and the rise in infringement decisions related to no-poach agreements, ensuring compliance with competition law is essential. It is therefore crucial for companies to review and, if necessary, adapt (internal) hiring policies to ensure that they do not engage in no-poach practices.
As an alternative to no-poach agreements, undertakings may rely on other safeguards to retain talent, prevent the disclosure of non-patent IP rights, and protect investments in employee training. In its recently published Competition Policy Brief on antitrust in labor markets, the EC considered non-disclosure agreements, obligations to stay with an employer for a minimum amount of time and the repayment of proportionate training costs by an early-departing employee, to be viable alternatives. Additionally, “gardening leave” is considered legitimate, where an employee, during their notice period, stays away from work while still receiving salary and benefits, preventing them from taking sensitive information to a competitor. Lastly, exclusivity obligations that prevent employees from switching to a competitor can be valid alternatives, provided they comply with (national) labor laws and potentially applicable time restrictions. Exclusivity obligations should also be transparently communicated to employees.
Special thanks to Clara Gaeta for her contribution to this blog post.
