Thorough antitrust due diligence, possibly including interviews with human resources executives, should be conducted in the target companies. Cases of non-poaching of the DOJ have emerged from the merger reviews, with evidence emerging from documents submitted as part of the mandatory authorization. The parties should be aware of the risk that no solicitation agreement will emerge, especially as the US and European merger control authorities make increasingly comprehensive and costly requests for disclosure of documents. The European Commission has already examined anti-competitive behaviour linked to the poaching of a competitor`s employees. In its decision of 21. In October 1998, in Case COMP IV/35.691/E.4 — Pre-insulated pipes, it imposed fines on producers of pre-insulated tubes for their participation in a cartel in the district heating sector in Europe. The cartelists took steps to eliminate Powerpipe, a company that refused to participate in the cartel. The decision includes a campaign by two of Powerpipe`s main competitors to attract Powerpipe employees, particularly general managers, by offering them wages and employment conditions unprecedented in the industry. Powerpipe suggested that the main objective of this tactic was to undermine Powerpipe`s position in the market, on the one hand by obtaining commercially sensitive internal information and, on the other hand, by affecting customer relationships until staff replacements could be found.
In our view, European regulators are monitoring developments in the US and increasingly cracking down on non-poaching agreements and wage deals. In 2016, the Italian competition authority fined eight model agencies €4.5 million for wage-setting agreements. In 2017, three French flooring companies were fined a total of €302 million for concluding an informal no-poaching agreement. Last year, Ireland`s central bank opened an investigation into an alleged no-poaching deal between Italy-based asset management companies. Non-poaching and wage-setting agreements can be prosecuted in the UK, and the directors involved can be disqualified by the boards, posing a real risk to candidates for PE`s boards. Claims for damages have also become a privileged instrument of private performance in Europe. To speak with a contract lawyer who advises you on restrictive covenants and non-poaching clauses, email us at firstname.lastname@example.org or call us on +44 20 7036 9282 for an initial interview. On 19 October, Margrethe Vestager, Executive Vice-President and Commissioner for Competition of the European Commission, delivered a speech in which she discussed the EU`s current cartel policy, possible changes to the Commission`s leniency programme and recent efforts to carry out dawn raids. Vestager spoke in particular of so-called “non-poaching” agreements, in which companies undertake not to recruit employees among themselves and/or to set their salaries. Non-poaching agreements are agreements between competing companies to enter into agreements regarding their hiring practices, such as not hiring each other`s employees or coordinating the amount of compensation offered to employees. As Noted by Oxera Consulting, an economic and financial consulting firm, unlike other forms of labour market agreements, such as non-compete obligations, employees are generally unaware of these agreements. The main difference between non-compete obligations and non-poaching agreements is that, as a rule, employees are aware of a non-compete obligation in their employment contract, which can – at least theoretically – give them the opportunity to negotiate its terms.
However, this is usually not possible with non-poaching agreements. Thus, anti-poaching clauses prevent employees and consultants from returning to the protected company and involving employees and consultants in their new business. Such a restrictive agreement may prevent an employee from competing with their former employer, for example by dealing with their clients or by debauching other employers from their former employer for a period of time. However, these provisions must be proportionate. Employers have the right to protect their legitimate business interests, but restrictions on their activities after their departure must be proportionate. For example, it must be reasonable to prevent an employee from working in a specific geographic area; and each period must also be reasonable (6 months may be appropriate, for example, while 2 years may not be appropriate). The EC has not yet dealt with non-poaching agreements under competition law; However, they seem to be on the radar. In her 2021 speech, Commissioner Vestager made it clear that price-fixing and market-sharing agreements are still the “bread and butter” of the European Commission`s work, but she noted: “Some buyer cartels have a very direct impact on individuals as well as on competition when companies work together to set the wages they pay; or when they use so-called “no-poaching” arrangements as an indirect means of keeping wages low and preventing talent from settling where they best serve the economy. Treatment of non-poaching agreements by the EC and national competition authorities As stated in various working documents, it is widely accepted (including in the EU) that labour markets are covered by competition law. As Oxera explains, economic theory assumes that in perfectly competitive labor markets, there are several workers on the supply side and several employers on the demand side, and each party has comparable bargaining power.