The Gautam Adani-led Adani Group and Mukesh Ambani’s Reliance Industries have entered into a no-poaching agreement. The no-poaching agreement will restrict employees of both conglomerates from joining the rival group. The agreement has come into effect from May this year and will apply to all their businesses.

What is a no-poaching agreement?

A no-poaching agreement is entered into with other companies or firms from the same business lines or industry sector. They seek to ensure that the contracting companies do not poach or solicit employees from each other and follow a particular process. The agreement may extend to hiring too, even if an employee applies for the position on their own. 

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In either event, it keeps the company from losing out on their best, most skilled employees, but prevents the employees from being able to pursue other opportunities that may be better for them financially or otherwise. 

The agreements could provide the situations when an employee from one contracting company may join the other contracting company and whether the current employer’s consent is required. The agreement may also include a negative list to cover a defaulting employee who has not served his notice period, refunded the sign-on bonus, or returned company equipment.

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A no-poaching agreement may seem great for the companies who are part of the agreement, but if not drawn up correctly, the company may violate antitrust laws. To avoid any issues with no-poaching agreements, many companies use non-compete agreements instead. 

No-poaching agreements are found in nearly every industry across the world. The most common sectors affected by no-poach agreements are technology, healthcare, aerospace, government contractors, and professional services. 

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In India, no-poaching agreements have always been around as a practice and are increasingly becoming more prevalent, as the competition for talent intensifies and wage costs soar. Rising wage costs are a risk to companies, especially where talent is scarce, and a potential bidding war can magnify the risk.

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These pacts have always existed, and they continue to be informal in nature, a senior professional of a global executive search firm told Business Insider. No poaching agreements are legal as long as they do not restrict an individual’s right to seek employment.