KKR & Co. has prohibited non-compete agreements for lower-paid employees at its US portfolio companies, aiming to show that the restrictive contracts aren’t needed for firms to remain competitive.

By Allison McNeely Workers making less than $100,000 a year at the companies KKR owns are no longer subject to non-competes, Pete Stavros, the firm’s co-head of global private equity, said in an interview. KKR has banned enforcement of existing non-competes and new non-competes, and aims to expand the policy to employees earning more than $100,000 over time, he said.

The agreements, which prevent employees from working for a competitor or starting a competing firm in a specified amount of time after leaving a job, are common for executives in industries like financial services and tech. But they have been creeping into more junior roles, Stavros said. “Economists would say non-competes can suppress wages,” he said.

The ban, formalized last year, is part of a series of measures KKR has undertaken in recent years to improve engagement, retention and well-being at its portfolio companies, which employ more than 800,000 people. In line with that strategy, KKR would be reluctant to acquire companies where making money for its investors would require widespread layoffs, Stavros said.

The firm’s prohibition of non-competes follows an attempt by the Federal Trade Commission in 2024 to enact a nationwide ban on the contracts for all workers. The US Chamber of Commerce, the pro-business lobby group, successfully sued to stop it.

KKR has “a weird kind of moral leverage” to take an action like this, because private equity is viewed to be the “hard edge of capitalism,” according to Stavros. He said he hopes KKR’s experience can help demonstrate that companies can operate successfully without non-competes for lower-paid employees, and inform the broader policy debate.

He first encountered non-competes when he was evaluating a pet retailer and saw that its dog groomers were bound by the contracts. The bipartisan Economic Innovation Group has found that non-competes are widespread across industries, which prompted KKR’s private equity partners to review their portfolio companies for how they were using them, he said. They determined the contracts were pervasive among lower-level employees at companies they had acquired.

In 2024, KKR asked portfolio company chief executive officers to consult with the firm before enforcing non-competes, Stavros said.

KKR, which manages nearly $800 billion in assets, is one of the pioneers of the leveraged buyout, with its 1989 acquisition of RJR Nabisco memorialized in the classic business book Private equity firms have been criticized for their track record of taking control of companies and then laying off employees and aggressively cutting costs after purchase.

As part of KKR’s worker-engagement efforts, more than 90 of its portfolio companies participate in an employee ownership program, through which non-executive workers share in the proceeds after KKR sells their company. Since 2011, 40,000 employees have received more than $2 billion in cash from their ownership stakes. Stavros founded a nonprofit called Ownership Works that encourages companies to adopt employee equity programs.

KKR has also partnered with professor Jamil Zaki of Stanford University to study how to increase empathy among its own partners and portfolio company CEOs.