The clash between labour protections and no-poach agreements in Central and Eastern Europe

In line with the EC's intensified focus on labour market collusion, national competition authorities have already followed suit. For instance, the Slovak competition authority opened an investigation into a potential labour cartel. Authorities have also demonstrated a willingness to impose fines on a range of entities, including real estate agencies in Lithuania (a EUR 969,060 fine), football league clubs (a EUR 11.3 million fine) and tech consultancies in Portugal (fines of EUR 1,323,000 and EUR 2,481,000). In 2022, the Romanian Competition Council (RCC) also launched its first investigation on the market for skilled and specialised labour in the field of motor vehicle manufacturing and/or other related activities, indicating the existence of possible no-poach and wage-fixing agreements.

No-poach agreements, ancillary restraints and the scope of Article 101 TFEU

The Policy Brief clarifies that no-poach agreements are viewed as a form of supply-source sharing and restrictions "by object" under Article 101 of the Treaty on the Functioning of the European Union (TFEU) and are unlikely to be regarded as ancillary restraints. However, the parties will scarcely be able to demonstrate that no less restrictive means exist to maintain the same relationship and that the clause must not apply to all employees but be narrowly defined. On the other hand, the decisional practice of national competition authorities, such as the Croatian competition authority, may substantiate that no-poach clauses can represent an ancillary restraint on competition.

Regarding the possibility of an exemption under Article 101(3) of the TFEU, the Policy Brief highlights that while no-poach agreements might theoretically have pro-competitive effects by addressing investment hold-up problems, evidence for such efficiencies remains uncertain. In practice, it appears unlikely that claims of a legitimate objective pursued by the no-poach agreements will convince the EC. This is because such objectives, however legitimate, can be achieved by less restrictive means, such as non-disclosure agreements, obligations to remain with an employer for a minimum period, repayment of proportionate training costs and the granting of gardening leave.

Finally, the Policy Brief observes that non-compete clauses in employment contracts are typically beyond the purview of Article 101 of the TFEU, as they are not agreements between undertakings. If such clauses align with national employment legislation, the EC indicates that it would regard them as a less restrictive means of safeguarding an employer's investment in training, for example. The implementation of such less restrictive means, however, may not always be clear-cut where national labour laws are concerned, as these may be subject to detailed regulation, including with respect to their maximum term, or may be considered outright invalid.

Comparative perspectives on post-termination clauses and labour mobility in Bulgaria and Romania

Under both Bulgarian and Romanian labour laws, the regulation of post-termination clauses, such as non-compete and non-disclosure agreements, reflects a careful balancing of interests, though the approaches and requirements differ. Thus, while both jurisdictions aim to balance employment rights with economic principles, Romania's explicit statutory framework contrasts with Bulgaria's case law, where courts have adopted a more restrictive stance toward post-termination restrictions.

In Bulgaria, established court practice dictates that post-termination non-compete clauses are null and void (even against compensation), as they are seen as infringing upon constitutional labour rights. Enforcement of employee NDAs also presents considerable challenges, as employers must not only demonstrate the breach itself (mere employment with a competitor is insufficient), but also prove actual damages suffered, given that courts reject contractually stipulated penalties in NDAs. Additionally, the employer must show that effective legal and technical protections for confidential information were in place.

Conversely, Romanian labour laws expressly regulate non-compete clauses to align the principle of work freedom with market economy dynamics and fair competition, establishing a strict regulatory framework. Romanian non-compete clauses must meet several conditions to be valid, including written form, clear identification of restricted activities, specification of third parties with whom the employee is prohibited from engaging, defined geographic limits, set compensation and a precise duration. To protect employees further, Romania's Constitutional Court mandates that employers cannot unilaterally terminate non-compete agreements, upholding the principle of mutual consent.

Other alternative measures proposed by the EC, such as the repayment of training costs and the obligation to remain with the employer for a specified period, have limited application in certain jurisdictions, including Bulgaria, or are subject to strict form and permissibility requirements. Given that the less restrictive means referred to by the EC may not be easily (or at all) applicable under the labour laws of all EU Member States, it remains unclear how a balance can be achieved between promoting labour mobility, a key driver of innovation, and safeguarding employers' business secrets and investments.

authors: Georgiana Bădescu, Sabina Aionesei, Tereza Shishkova, Teodora Burduja, Ema Stoyanova