There is no surprise that labour markets and employer/employee relationships attract the interest of competition lawyers and regulators. Discussions centre around wage-fixing and no-poach agreements, which in May 2024 were condemned by the European Commission as “by-object” restrictions by Art. 101(1) TFEU. A similar stance was adopted by the U.S. Federal Trade Commission that issued a rule prohibiting the use of non-compete clauses in relation to workers a month earlier. However, the U.S. rule is currently disputed.
This matter is essential for consultancy and outsourcing businesses whose main resources are qualified professionals and their unique capabilities. However, employers in other industries should also pay close attention to these developments.
Below we set out the action points enabling companies to assess the risks and revise their practices. Further, we outline where possible anti-competitive conduct in labour markets may exist.
Labour, like all other inputs (raw materials, energy, utilities, etc.), is subject to the law of supply-and-demand. Consequently, competition between sellers and buyers with an interest in labour is protected.
Competition law condemns three types of conduct that are considered to pose the gravest threats to a market economy:
Conduct of this kind can take the form of agreements. However, under competition law, the “agreement” notion is very broad and does not require explicit arrangements between parties.
The notion of “agreement” includes the exchange of commercially sensitive information, such as future prices, volumes, investments, business plans, etc. The disclosure of such information may diminish uncertainty, the essence of market competition, as to the behaviour of a competitor. In labour markets, such uncertainty may be diminished by exchanging information pertaining to individual salaries, recruitment/lay-off plans or employment structures that is not publicly known.
Competition law applies to businesses. Therefore, B2B contracts fall under Art. 101 TFEU and national competition laws. Individuals operating under B2B contracts are “undertakings” under competition law even though their situation is comparable to that of workers. However, employees cannot be considered “undertakings”. Consequently, employment contracts cannot be the subject of antitrust scrutiny even if they contain anticompetitive clauses such as post-contract non-competes.
Furthermore, neither EU nor national competition law may prohibit anticompetitive arrangements if those are inserted in contracts with non-economic operators.
Antitrust rules protect both actual and potential competition, raising the question of where we should look for anticompetitive agreements in labour markets.
Companies fight for talent at the upstream level, namely, they compete for it by offering more attractive conditions (remuneration, benefit packages, pension schemes). Companies with different business profiles may compete for the same pool of candidates. For instance, a law firm and a construction company might be equally interested in employing a real estate lawyer although what those firms supply (legal services and construction work) are in no way substitutable for each other.
If an individual operates as a business and cooperates with a company under a B2B contract, they may be a competitor in relation to the company they cooperate with. In the services sector (IT, healthcare, legal, design, etc.), an individual typically has sufficient skills to provide stand-alone service substitutable for those provided by a larger organisation.
Arrangements between a company and an individual engaged under a B2B contract related to price-fixing, market sharing or capping output might be caught by competition law prohibitions.
This is particularly true of non-compete clauses, especially after a contract ends, as they limit an individual's ability to offer services independently. This may lead to market sharing or the capping of output. Such arrangements may be prohibited by Article 101 TFEU or equivalent provisions enshrined in national laws.
Even anticompetitive agreements can be exempted from Art. 101 TFEU and national competition laws – and thus be permissible under competition law - if they merely have an insignificant market impact.