No-poach agreements: going green, grey or even black?

16.06.2023 No-poach agreements: going green, grey or even black?

Recently, there has been a lot of discussion in the public about the practice of “poaching” employees.

A no-poach agreement is an agreement between competitors not to hire each other’s employees or an agreement on the level of remuneration of employees. Such agreements need to be distinguished from non-compete clauses in contracts between employer and employee.

In its statement of 9 June 2023, the Competition Council stated that competitors are prohibited from concluding "no-poach" agreements, asking them to report to the Competition Council on the existence of such agreements in the market.

The Competition Council has pointed out that such agreements restrict employee mobility, reduce competition between employers and harm the employee's career development. 

The current practice of the Member States of the European Union is ambiguous, but examples from several countries show that such agreements have been regarded as aiming to restrict competition, which is the most serious infringement of competition law. For example, the Lithuanian competition authority fined the Lithuanian Association of Real Estate Agencies and its 39 members who had agreed not to poach each other's employees. In Portugal, the Portuguese professional football league was fined for an analogous violation.

Fm the examples in practice, it can be seen that such agreements are common in specific sectors, primarily between industry associations. The agreement may be considered prohibited in any form between any competitors, including the so-called "gentleman's agreement".

In our opinion, this is not a straightforward issue and each specific situation should be assessed individually, taking into account the context of the conclusion of the agreement. For example, situations where competing undertakings, in the absence of any other legal relationship between them, agree to “not poach” or where, in addition to the terms of a “no-poach” agreement, there is also an agreement on a remuneration cap, should be distinguished from cases where such agreements are concluded in share purchase agreements and similar agreements in which one party allows access to its trade secrets, customer, supplier and employees list in order to take care that during the transaction period or certain period afterwards, this access is not misused to implement unfair competition and unfair use and disclosure of trade secrets.

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