Can companies agree not to steal from each other's employees?

This is a first in France. The Competition Authority has just sanctioned four companies for failing to poach employees. They had mutually prohibited each other from soliciting and recruiting each other's employees. How was the scandal uncovered?

In 2018, a technology consulting firm came knocking on the door of the French Competition Authority. Its name is Ausy and it is requesting leniency for an offense it committed and is about to reveal. It claims, with supporting evidence, to have entered into an agreement not to poach employees, notably with its competitor Alten.

The investigation conducted by the competition authority confirms the facts. For nine years, Ausy and Alten mutually prohibited each other from performing belly dances for their respective management teams. Direct solicitations were prohibited, unsolicited applications were thrown out, and the two companies consulted each other when employee transfers were planned. This informal, unwritten agreement, which the Competition Authority describes as a " gentlemen's agreement ," was comprehensive and had no time limit.

During the investigation, similar practices were discovered between two other companies in the sector. As a result, all companies, with the exception of Ausy, which self-reported the offence, were fined. Alten will have to pay the largest penalty, €24 million.

" This is a strong signal ," according to lawyer Malik Idri, a partner at FPTA. " This is the first time that no-poaching agreements have been classified as anti-competitive practices because they seriously harm employees . They are prevented from leaving, and this deprives them of opportunities and leverage to obtain better wages ." These practices have existed in companies for a long time, says the lawyer. Now, the warning is clear. It's prohibited. With a few exceptions, however.

The Competition Authority has indeed taken advantage of this affair to do a lot of educational work and to clarify what is permitted and what is not.

The non-solicitation clause remains permissible, provided it is time-limited and names the individuals concerned. For example, when a consulting firm sends a consultant on assignment, the host company agrees not to poach them. The clause is then written in black and white in the contract. " It's a classic and widespread practice in subcontracting ," says Malik Idri. But are they all compliant?

What is formally prohibited, however, is the " gentlemen's agreement ," a global agreement concluded orally, which applies indiscriminately to all or part of the employees, for an indefinite period. According to the lawyer, competition authorities in the United States and Europe are increasingly taking a position on this issue.