No-Poach Agreements: The Labor Market as a New Priority in Competition & Antitrust Law

Within days of each other, the European Commission and the French Competition Authority imposed sanctions on anticompetitive agreements in the labor market involving reciprocal no-poach agreements between competing companies.

 

These decisions mark a turning point: for the first time, these authorities have found such arrangements to be unlawful and have taken enforcement action against restrictions affecting labor mobility.

 

General no-poach agreements classified as restrictions of competition by object: the first time such agreements have been sanctioned as distinct infringements in France

 In Decision No. 25-D-03[1], the French Competition Authority ("FCA”) found that two separate but similar anticompetitive agreements had been concluded between companies operating in the engineering and digital services sectors, which it sanctioned as independent infringements in this unprecedented analysis.

  

These "gentlemen’s agreements” concerned the managerial staff of the four sanctioned companies and provided for:

  

• A mutual prohibition on soliciting each other’s employees;
• A prohibition on hiring them in the case of unsolicited applications;
• Prior coordination in the event that such "business managers” were considering a move.

 

As these agreements were broad in scope, of indefinite duration, and inherently imprecise, the FCA classified them as restrictions of competition by object, aimed at allocating sources of supply on the upstream market for the recruitment of human resources in the relevant digital services sectors.

 

 The FCA further emphasized that those sectors are characterized by the strategic importance of human resources to the business activities of the companies concerned, and it imposed fines totaling nearly €30 million.

 

At the European level: the sanctioning of no-poach agreements in the context of a minority shareholding

 A few days earlier, the European Commission fined two companies a total of €329 million in the context of a first-of-its-kind enforcement action targeting:

•  A cartel in the labor market; and
• The anticompetitive use of a minority shareholding in a competitor that could not, at the time, be regarded as forming part of the same economic entity for EU competition law purposes[2].

 

Following Delivery Hero’s acquisition of a minority shareholding in Glovo, which initially did not confer control, the European Commission found that the companies progressively coordinated their conduct through:

 

 

• A no-poach agreement covering their respective employees, notably set out in the shareholders’ agreement;
• Exchanges of commercially sensitive information that enabled them to align their competitive behavior; and
• The allocation of geographic markets.

 

The European Commission thus warned against the antitrust risks arising from horizontal cross-ownership between competitors that may facilitate anticompetitive practices.

 

Non-solicitation clauses: a case-specific assessment

Following a fact-specific assessment of the aforementioned case, the FCA, however, declined to classify as anticompetitive agreements the employee non-solicitation clauses contained in the partnership agreements between the companies involved.

 

It considered that those clauses – limited in duration and in scope as regards the personnel and projects concerned – did not constitute restrictions by object or by effect, and did not durably restrict employee mobility.

 

As this assessment was purely context-specific, the FCA emphasized that clauses that are overly broad, or excessive in scope or duration, could still be classified as anticompetitive agreements.

 

What are the implications for companies?

This extension of the scope of competition law to employee mobility requires companies to exercise heightened vigilance regarding no-poach and non-solicitation clauses frequently included in subcontracting or consortium agreements, particularly where the relevant companies are competitors.

 

In particular, careful consideration should be given to the specific wording of such clauses, their scope, and their proportionality.