Non-competition contract

When can a non-compete agreement be concluded?

A non-compete agreement can only be concluded for a particularly serious reason. If the employer has no particularly serious reason to restrict the employee's competitive activities after the end of the employment relationship, there are no legal grounds for concluding the agreement and it does not need to be signed. If you are in doubt about whether the reason given by the employer is sufficient, ask the employer for clarification or contact the union before signing the agreement.

A non-competition agreement can be justified for jobs where the employee uses his employer's technical trade secrets in the course of his work, for example in product development activities, which he could exploit for his own or another company's benefit. However, it is not permissible to protect the employee's skills on behalf of the employer: even if the employee gains good experience in his/her profession, this alone is not sufficient for a non-competition agreement to be concluded, but the employer must retain the employee, for example through competitive remuneration. A non-competition agreement cannot therefore be concluded for the sole reason of restricting competition.

Another commonly used justification for non-competition agreements is the interest in retaining customers. A concrete example is a real estate agent who uses his employer's customer records in the course of his work and who, in the course of his work, establishes personal customer relationships that are easily transferable for his own or a third party's use. In this case, the employer may have grounds for a non-compete agreement. Even in this case, there is no justification for a non-competition agreement if the clientele is a known group of people with whom all those working in the sector would be able to communicate directly.

The non-competition agreement is sometimes also justified by specific training provided by the employer at his own expense, which the employee could not obtain elsewhere free of charge. Apprenticeships or similar training alone do not constitute a particularly strong reason for a non-compete agreement. A particularly serious reason may also be based on any other need to restrict competition acceptable to the employer and must always be justified in the light of the employee's duties and position.
 

What is restricted by a non-compete agreement and for how long?

The agreement restricts the employee from engaging in activities that compete with his or her "old" employer, either on his or her own account or on behalf of someone else. What constitutes a competing activity depends largely on the sector in which the activity is carried out. If a non-competition agreement is agreed, it would be good to draw up a clear boundary already in the contract as to what the employer considers to be a competing activity. For example, in the interest of maintaining a customer base, the employer may have the justification and desire to restrict competition only on a regional basis. In this case, it would be a good idea to state in the non-competition agreement itself if the employer has a need to restrict competition only on a territorial basis, in order to avoid future problems.

A non-competition agreement may restrict the employee's right to conclude a new employment contract or to pursue a profession for a maximum period of six (6) months. If the employee can be considered to receive fair compensation for the obligation arising from the non-competition agreement, the restriction period may be agreed for a maximum of one year. Trade Union Pro does not recommend a restriction of competition for a period longer than six months unless the compensation for the extension of the period is adequate and at least equal to six months' salary.
 

What happens if I breach a non-compete agreement?

Breaching a non-compete agreement can result in a penalty of damages or a fine. Under the law, the penalty can be up to a maximum of six months' salary. In practice, the sanctions imposed for breach of a non-competition agreement have generally been reduced in case law, so that the employee has to pay about one third of the damages or penalty. In general, non-competition agreements provide for a penalty equivalent to six months' salary, which is a good and clear practice in this respect, since the determination of the damage caused by a breach of a non-competition agreement is generally very difficult and difficult to predict.

A non-competition agreement is not valid if the termination is due to reasons attributable to the employer. In other words, if the employer terminates the employee's employment for productive and economic reasons, the non-competition agreement previously concluded will cease to be valid. In situations of dismissal, the employee's employment is not terminated and the non-competition agreement is therefore not applied to the situation, but the same criteria are applied as for the non-competition and confidentiality obligations during the period of employment. In the event of a competitive employment during a lay-off, it is advisable to discuss the acceptability of this with one's own employer or to contact the trade union.

There is now an unjustified attempt to link non-competition agreements to ordinary staff work, where there is no legal basis for concluding an agreement. However, even if you sign such an unlawful agreement on entering employment, the contractual term is not valid, i.e. no sanctions can be imposed for breach of a post-employment non-competition clause.