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No-poaching agreements

We would like to draw your attention to no-poaching and wage-fixing agreements, which are a topic that the Czech Office for the Protection of Competition wants to focus on in its future control activities.

In the labour market, it is normal that employers often try to prevent their key employees from moving to competitors. If employers do so in a unilateral way, it is not in principle anti-competitive behaviour. However, where there is an agreement between employers aimed at restricting employees from switching from other employers in a particular sector, this agreement generally constitutes anti-competitive conduct and can be viewed as a cartel agreement. As with other prohibited agreements in the field of competition, the competitor is liable to a fine of up to 10 % of its turnover for the preceding completed financial year.

The content of a non-solicitation agreement usually includes a commitment that the employer will not solicit the other employer’s employees, that the employer will not employ the other employer’s employees or both of these commitments at the same time. Closely related to such agreements are wage-fixing agreements, that involve the fixing of wages or other remuneration terms between employers and may also have a negative impact on competition. However, there are also exceptions where a no-poaching agreement does not constitute anti-competitive conduct. These include, for example, mergers or acquisitions of competitors where non-solicitation clauses are usually negotiated.

However, the above-mentioned agreements should be distinguished from competition clauses, which are normally negotiated in employment or other agreements. The fundamental difference between a competition clause and the above-mentioned agreements is that the employee knows about the competition clause and can influence its wording.

Unfortunately, there is not yet a large number of significant decisions in the Czech Republic or in the European Union that lay down detailed rules that would make it possible to determine quite clearly when a no-poaching agreement is or is not in line with competition. Employers are therefore advised to take into consideration the above and to eliminate coordination with other competitors, in particular about policies or strategies for finding, approaching and hiring employees or setting their wages or other terms and conditions of their remuneration. All arrangements in this area should be properly assessed on a case-by-case basis and their prevention is recommended to be included in competitors’ compliance programmes so that they are properly prepared for such agreements and assess their potential competitive impact.

If you would like more information on the above or a legal assessment of the no-poaching agreement, please do not hesitate to contact us. Especially in the IT sector, these agreements are concluded often.

Mgr. Igor Pieš partner

igor@kastnerpies.cz