We are used to seeing no-poaching restrictive covenants for departing employees, but can businesses enter into agreements not to poach each other’s talent? In California, it appears that such agreements are unlawful as this week tech firms eBay, Apple, Google, Adobe and Intel have all settled class-action lawsuits for “no-poaching” behaviour.
Do these practices exist in the UK and, if so, would they be lawful? According to recruitment industry magazine The Recruiter such practices do exist in this country, although perhaps on a less formal basis.
While non-poaching agreements could be in breach of UK and EU competition law, what are the employment law considerations?
If a UK employer enters into a non-poaching agreement with a competitor, they could expose themselves to claims for breach of mutual trust and confidence. Let’s think about what’s going on here: the employer has entered into an agreement, serving its own interests, which has the effect of reducing its employees’ job prospects and, potentially, dampening down wages. I could envisage employees arguing that such behaviour has the potential to seriously damage the employment relationship, particularly if they were not aware that their employers were party to non-poaching agreements when they entered into their employment contracts.
For the employee, bringing a breach of confidence/running constructive dismissal argument might be pretty pyrrhic given that if they resign and declare the covenant void, they can hardly ‘require’ the other party to the non-poaching agreement to give them a job. But whilst there might well be causation issues, if an argument of fundamental breach were successful there could be other potential advantages, as the effect would be free the employee from any post-termination restraints in their own employment contract, hence making it easier to move immediately to another employer.
From a more practical perspective, entering into non-poaching agreements with competitors strikes me as pretty short termist. Perhaps I am an idealist, but I would have thought that employers would want to ensure they are able to attract and retain the best talent – that strikes me as far better achieved in an open rather than closed job market.