KKR bans non-compete clauses for US portfolio company staff earning under $100,000

KKR has prohibited non-compete agreements for employees earning less than $100,000 annually at its US portfolio companies, as the PE firm seeks to demonstrate that businesses can remain competitive without restricting workers’ future employment options, according to a report by Bloomberg.

The report cites Pete Stavros, KKR’s co-head of global private equity as confirming that the policy, formalised last year, covers both new agreements and the enforcement of existing clauses. The firm intends to extend the restrictions to higher-paid employees over time.

KKR’s decision forms part of a broader effort to improve employee engagement, retention and wellbeing across its portfolio, which collectively employs more than 800,000 people. Stavros said the firm believes such restrictions can suppress wages and wants its experience to inform the wider debate over their use.

The initiative follows the Federal Trade Commission’s attempt in 2024 to introduce a nationwide prohibition on non-compete agreements. The proposal was blocked following a legal challenge by the US Chamber of Commerce.

Stavros said he first became concerned about the practice while evaluating a pet retailer where dog groomers were bound by non-compete clauses. KKR subsequently reviewed the use of the agreements across its portfolio, finding that they were widespread among lower-paid workers. In 2024, the firm asked portfolio company chief executives to consult with KKR before enforcing the restrictions.

The policy also reflects KKR’s wider approach to workforce management. Stavros said the firm would be reluctant to acquire businesses where generating returns for investors depended on widespread redundancies.

KKR has faced the same criticism levelled at the broader buyout industry over job cuts and aggressive cost reduction following acquisitions. Its employee engagement strategy includes an ownership programme through which non-executive staff share in the proceeds when portfolio companies are sold.

More than 90 KKR portfolio companies participate in the scheme. Since 2011, approximately 40,000 employees have received more than $2bn in cash from their ownership stakes.

Stavros also founded Ownership Works, a nonprofit organisation that promotes employee equity participation. Separately, KKR has partnered with Stanford University professor Jamil Zaki to study ways of improving empathy among the firm’s investment partners and portfolio company executives.