The European Commission (“the Commission”) has recently published a Competition Policy Brief on anti-competitive labour agreements.

The Commission’s May Issue policy brief noted that the Commission considered no-poaching and wage fixing agreements as harmful to competition in labour markets and that it takes active measures against such agreements in tandem with national agencies.  It also noted that it is investigating such cases and has carried out unannounced inspections (‘dawn raids’) of companies involved in these behaviours, alongside national competition authorities.

Competition law and labour markets

The behaviours the Commission is concerned about are:

  • No-poaching agreements - agreements between employers not to approach or hire each other’s employees (or not to do so without the other’s consent); and 
  • Wage-fixing agreements - agreements in which businesses set the same wage rates (or benefits) for their employees and/or maximum caps on their wages or benefits.

In our recent blog post, we considered the stance of the UK competition regulator (the “CMA”) on labour markets and how restrictions in agreements can breach competition law. 

The Commission’s approach is very similar to that of the CMA: no poaching and wage fixing agreements are likely to be a breach of competition law, namely the prohibition on anti-competitive agreements. Both types of agreement are generally seen as harmful to competition between employers for employees. The Commission notes that they can lead to reduced wages for employees and ultimately lower compensation, benefits, productivity, and innovation, as employees may find it harder to move between employers or negotiate counter-offers from another employer. 

The Commission notes that it considers such restrictions as ‘by object’ restrictions – harmful enough to competition that their effects need not be examined – making them a particularly serious breach of competition law. It notes that there may be cases where these types of agreements are justifiable breaches of competition law, but only in very specific circumstances and when certain criteria are met.

For businesses based in the EU and the UK, it is helpful to consider your employment practices and whether these types of restrictions exist, as both the EU and UK competition authorities are actively considering these issues, and collaborating on enforcement activity (including dawn raids). HR and resourcing business professionals should be aware of these risks and prioritise their mitigation.

Our Competition and Employment teams have extensive experience in this area, so please do reach out to your usual Burges Salmon contact if you have any questions.

This post was written by Henry Dalton.