Agreements on Non-Competition for Employees (No-Poach Agreements)
What are “No-Poach Agreements”? Why are they considered unfair competition? What penalties can result from entering into such agreements?
The European Parliament has passed legislation in 2022 to change the structure on the boards of the largest companies in member states. They mainly concern the standardization of recruitment for top management positions in companies. The aim of such a measure is to ensure a balance in the representation of men and women in management positions in listed companies.
The motivation for the implementation of the directive came from years of observations of the filling of leadership positions in European Union member states. According to the European Institute for Gender Equality, in 2021 women accounted for an average of 30.6% of members of corporate bodies in the largest listed companies and only 8.5% of CEOs.
What solutions does the gender balance directive introduce?
The directive stipulates that listed companies are to increase the number of women on their boards by June 2026. They are to hold at least 40% of non-executive director positions or 33% of all executive positions. Covered entities will have to report once a year on the implementation of the directive’s provisions.
Who is affected by the new gender balance directive regulations?
The directive’s provisions cover listed companies. A listed company within the meaning of the directive is a company whose registered office is located in a member state and whose shares are admitted to trading on a stock exchange. Thus, the regulations will not directly apply to companies that are not joint stock companies (i.e., limited liability companies, for example), as well as listed companies with fewer than 250 employees. Listed companies are considered to be of particular economic importance and influence on the market as a whole, and for this reason they are the ones that have been regulated first.
What happens if a listed company fails to achieve the targets required by the directive?
In such a case, the company will be forced to make special arrangements for the selection (recruitment) of candidates for management positions. A recruitment process for management positions in accordance with the directive should then be launched.
It is to be based on clear and unambiguous criteria. The basis for the selection of candidates for positions will continue to be substantive requirements (the extent of their knowledge, skills, experience), so that they will be taken up by the most qualified people. Thus, the entrepreneur is expected to make a comparative assessment of the qualifications of individual candidates. However, when a situation arises in which candidates for a given position have the same qualifications, priority will then be given to a woman (as a candidate belonging to the underrepresented gender).
Implementation of the directive’s provisions in member states
A directive is a legal act that requires so-called implementation, i.e. the development of national legislation (laws, regulations) that will comply with the provisions of the directive. Directives, unlike EU Regulations, do not apply directly in member states.
Member states have until December 28, 2024 to publish the relevant regulations necessary to implement the objectives of the directive. So we have to wait until the end of the calendar year for more concrete national regulations.
Companies, on the other hand, should adjust their operations to meet the goals of the directive by June 30, 2026 at the latest.
What are “No-Poach Agreements”? Why are they considered unfair competition? What penalties can result from entering into such agreements?
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Serving as a member of the management board involves rights, duties and responsibilities. Who is a member of the management board? How do they differ from a commercial proxy? Are the details of a board member publicly available? Answers to some questions related to the topic of management board membership can be found below.
