Anti-Competitive Wage-Fixing Agreements (Wage-Fixing Agreements)
What are “Wage-Fixing Agreements”? Why are they considered unfair competition? What are the penalties for entering into such agreements?
What are „No-poach agreements”?
Why are they a manifestation of unfair competition?
What penalties can be imposed for entering into them?
Unlawful collusion and agreements, as well as abuse of dominant market positions by companies, can significantly disrupt competition. This is particularly dangerous in the labor market, where maintaining healthy and balanced competition is crucial.
Recently, the European Commission and the President of the Polish Office of Competition and Consumer Protection (UOKiK) have been paying close attention to illegal agreements involving non-competition for employees. These include “no-poach” agreements (prohibiting employee solicitation) and “wage-fixing” (coordinating pay scales).
What Are No-Poach Agreements?
“No-poach agreements” are arrangements between companies where the parties agree not to compete for each other’s employees. In practice, such agreements are often embedded in broader contracts (e.g., framework cooperation agreements between two companies). For example, Company A and Company B agree that Company A will not hire, collaborate with, recommend for employment, or propose employment or collaboration to employees or associates of Company B, and vice versa.
In competition law, the term “employee” is interpreted broadly. It can include any individual performing work, whether under an employment contract, a service agreement, or a B2B contract.
Two key types of “no-poach” agreements include:
Why Are No-Poach Agreements Unlawful?
“No-poach” agreements significantly restrict employees’ opportunities to find employment without their consent or even knowledge, thereby distorting labor market competition.
These arrangements negatively affect market development, particularly in areas such as wages, productivity, and innovation. They are typically secretive, known only to the companies involved in this illegal process. Consequences include a lack of competition for the best-qualified employees, lower wage levels, and inefficient allocation of skilled workers to optimal positions.
Such agreements violate Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), which prohibits agreements aimed at or resulting in the prevention, restriction, or distortion of competition. Under Polish law, they breach Article 6 of the Act on Competition and Consumer Protection.
Heightened Focus by the European Commission and UOKiK
In May 2024, the European Commission published a policy summary, Antitrust in Labour Markets | Competition Policy Brief, emphasizing that anti-competitive agreements in labor markets are among the most severe violations of competition law. Member states’ authorities are tasked with imposing appropriate penalties.
In Poland, the President of UOKiK investigates such cases. For instance, this year, UOKiK launched an inquiry into an alleged illegal collusion between major retail chains and logistics companies to avoid soliciting each other’s employees. In July 2024, UOKiK published a guide on anti-competitive labor market agreements.
These recent actions indicate an increased focus on no-poach agreements, serving as a warning signal for companies involved in such practices.
Penalties for Entering Anti-Competitive Agreements
Companies engaging in such agreements face severe penalties. Employers may be fined up to 10% of their turnover in the financial year preceding the imposition of the fine. Additionally, individuals in managerial roles who violate competition laws may face fines of up to PLN 2 million.
What are “Wage-Fixing Agreements”? Why are they considered unfair competition? What are the penalties for entering into such agreements?
