Buyout firms and portfolio companies beware increased interest in no-poach and wage-fixing agreements from antitrust enforcers in the US and Europe.

By Tom Evans, David LittleDavid WalkerElizabeth Prewitt, Sarah Gadd, Joshua Chalkley, Anuj Ghai, Catherine Campbell, and Peter Citron

Buyout firms and portfolio companies should take note of heightened scrutiny of HR and employment practices by antitrust enforcers, both in the US and in Europe. No-poach and wage-fixing agreements — arrangements between companies seeking to agree wages, or prevent or limit the hiring of each other’s employees — can lead to significant fines and even criminal sanctions, as well as private damages litigation. Parental liability for European antitrust failings can arise even in the case of a minority stake, and even where the buyout firm had no involvement in or awareness of the wrongdoing.

A Hot Topic for US Enforcement and Litigation

The US has led the way in aggressively investigating and prosecuting no-poach agreements that limit workforce mobility and/or depress wages, and increasing political sentiment against such agreements means that enforcement will continue. The US DOJ has ramped up its prosecution efforts and has said it will now “proceed criminally against naked wage-fixing or no-poaching agreements”. Before, the DOJ treated no-poach agreements as civil violations, most notably prosecuting Silicon Valley companies for “no cold call” arrangements that restrained recruitment of high-tech employees. In addition to employees litigating for damages, companies can now also face fines of up to US$100 million, and individuals up to US$1 million and 10 years in prison. No-poach agreements are a “high priority” for the DOJ and US state enforcers, and many criminal no-poach investigations are underway.

European Enforcers Are Taking Note

In our view, European regulators are observing US developments and are taking an increasingly stronger line against no-poach and wage-fixing agreements. In 2016, Italy’s national competition authority fined eight modelling agencies €4.5 million for wage-fixing agreements. In 2017, three French flooring companies were fined a total of €302 million for entering into an informal agreement not to poach. Last year, the Central Bank of Ireland launched an investigation into an alleged no-poach agreement between Italian-headquartered asset management firms. No-poach and wage-fixing agreements can be prosecuted criminally in the UK and involved directors can be disqualified from boards, posing a real risk to PE board nominees. Actions for damages have also become a favoured tool of private enforcement in Europe.

What Should PE Deal Teams and Portfolio Companies Do to Manage Risk?

Enforcement actions focus on agreements or understandings between companies, formal or informal, to limit competition between themselves in employee hiring or terms of employment.

While no-poach agreements are prohibited, companies can still impose carefully drafted post-termination non-solicitation covenants on employees. Such covenants can prevent ex-employees from poaching staff for a specified period. Non-solicit provisions remain useful for company owners, but their enforceability is subject to limitations and they should be narrowly drawn in terms of scope, duration, and geographical reach; for example in the UK, they are often limited to employees with influence over clients and customers.

Thorough antitrust due diligence, potentially including interviews with senior staff responsible for HR, should be conducted on target businesses. DOJ no-poach cases have arisen out of merger reviews, with evidence emerging from documents provided in connection with mandatory clearance. Parties should remain alert to the risk of no-poach agreements coming to light, particularly as both US and European merger control regulators are making increasingly full and burdensome document disclosure requests.

Deal teams should be aware that overly restrictive interim covenants on employee movement prior to merger control clearance can be viewed as a gun-jumping offence, if introduced at the buyer’s request or if to the buyer’s benefit. Protections and actions between signing and closing should be carefully considered.

Post-completion non-solicitation covenants that are imposed by buyers on selling shareholders under an SPA (for example by seeking to restrict the enticing away of employees of the aquired business) are also still acceptable, subject to the usual requirements to be reasonable in terms of scope, duration, and geographical reach.


  • Agreements or understandings that restrict worker mobility or impose salary caps, fixed wages, and other terms of employment, such as benefits, whether formal or informal
  • Certain information sharing practices regarding hiring and compensation and any benchmarking exercise must be carefully managed


  • Post-termination non-compete or non-solicitation restrictions on employees to limit attrition and poaching, but restrictions must be narrowly drawn in terms of scope, duration, and geographical reach based on prevailing law
  • Contractual restrictions on team moves can be viable alternatives to no-poach agreements, but remain untested in the courts
  • Non-solicitation clauses