The Belgian Competition Authority (BCA) has sanctioned Securitas, G4S and Seris for various malpractices in the private security sector. The reasons include price-fixing, bid rigging as well as "no-poach" or "non-solicitation" agreements, all in a period from 2008 to 2020. According to the BCA, These practices have as effect of preventing or restricting healthy competition between companies and go against Article IV.1 of the Code of Economic law. The BCA imposed fines of over 47 million euros to the companies concerned.
- What is the impact of no-poach agreements on employment law in this case?
In this case, the no-poach agreement is a secret agreement between companies not to compete for each other's employees: a no-hire agreement. In a healthy and well-functioning labour market, employers compete for workers and entice them to switch from employers. The non-poach agreement affects an employee's ability (or freedom) to move from one company to another. In contrast, the companies themselves benefit from it since it minimizes the risk that they will lose employees. In this agreement, employers do not compete for workers so they do not need to offer higher wages, nor offer amenities that would benefit the worker. In addition, the companies all applied the minimum hourly rates of the sector for the services of their security guards. They were able to do so, as they knew that their main competition would not poach them with higher wages. . To safeguard the normal competitive working of the labour market, workers must have the freedom to quit and move to more competing employers if their current employer does not pay them a competitive wage.
However, one has to bear in mind that some non-solicitation clauses are valid when they are drafted in a way that competition is minimally restricted, Belgian courts always have the authority to mitigate or declare void the relevant clause in event of abuse of law. In this specific case, the workers themselves are unknowingly restricted by this secret agreement for an undetermined period, by not being offered better employment terms , it stagnates their career and stiffles any competition.
- What is the impact of this case on non-solicitation clauses in service agreements (e.g. for consultancy)?
Consultants are often sent by their employer, a consultancy firm, to clients to deliver services. Often, the service agreement between the consultancy firm and the client includes a non-solicitation clause to protect the company's assets: the consultants, for whom the firm invested time and money to recruit and employ them. Contractors like consultancy firms want to avoid poaching employees. Such "no-poach" clauses need to be tailored to the circumstances: to be enforceable, it cannot impose an excessive restriction on the competition in the market. It needs to protect only legitimate business interests. For example, prohibiting the recruitment of a consultant for an indefinite period of time could be seen as disproportionate. The enforceability of the clause should be limited in time (e.g. until 6 months after the end of the project) and/or recruitment can be made possible in return for a payment of a certain amount of money. As long as these clauses remain proportionate, there does not seem to be a real negative effect on free competition. But the question remains where is the line between a proportionate and disproportionate clause? Factors like the price of the service, the duration of the project, the importance of the service, the recruitment costs made by the consultancy firm etc. should be taken into account. It is also recommended to always be transparent about such non-solicitation agreements, so the subject (the consultant) is well aware of its existence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.