Communication and advice, daily allowance applications, paid benefits and daily allowance decisions, membership fee information, personal contact details
A non-competition agreement is an agreement between an employer and an employee that restricts the employee’s right to move to a competing job or engage in a competing activity after the employment relationship ends. For example, the agreement may stipulate that the employee may not work in the same business or become self-employed in the same sector within a certain period after the end of the employment relationship.
The maximum limitation period under a non-competition agreement may be one year after the end of employment. The typical duration of a non-compete agreement is six months after termination of employment.
A non-compete agreement must be based on a particularly serious reason relating to the employer’s activities or the employee’s employment relationship. A non-competition agreement made without such a reason is null and void.
In assessing the particularly serious reason, account must be taken of the nature of the employer’s activities and the need for protection arising from the maintenance of a trade secret or from the specific training provided by the employer to the employee. In assessing the seriousness of the justification, account shall be taken of the employee’s position and duties and other relevant factors.
The employer must pay compensation for the restricted period
The employer is obliged to compensate the employee for the restriction period under the non-competition agreement. This compensation must be paid during the restriction period on a pay period basis. This payment schedule can only be agreed otherwise after the termination of the employment contract.
The amount of compensation for the restriction period is 40% of the employee’s normal salary if the restriction period does not exceed six months. If the period of restriction is longer than six months, the amount of compensation payable is 60% of the employee’s normal salary.
A contractual penalty may be agreed upon
A breach of a non-compete agreement can lead to the employer being entitled to claim damages from the employee. The burden is on the employer to prove the amount of damage suffered by the company and the causal link between the damage suffered and the employee’s breach of the non-competition agreement.
The parties to the employment relationship may agree on a contractual penalty in lieu of damages. The amount of the contractual penalty may not exceed an amount equal to the employee’s salary for the six (6) months preceding the termination of the employment relationship. Contractual penalty clauses should be avoided.
Termination of a non-competition agreement
The employer can terminate the non-compete agreement during the employment relationship. This may be, for example, because the circumstances that led to the non-compete agreement have changed and there is no longer a need to restrict competition.
The period of notice for termination of a non-competition agreement is 1/3 of the restriction period agreed in the non-competition agreement, but always at least two (2) months. The employer is no longer entitled to terminate the non-competition agreement once the employee has resigned from the employment relationship.
The maximum duration of the non-compete agreement and the maximum amount of the contractual penalty do not apply to employees who, by virtue of their duties and status, perform managerial work or occupy an independent position directly comparable to such managerial work. Non-competition periods of up to one year can therefore be agreed with employees in a managerial position.
It should be noted that the Employment Contracts Act does not apply to managing directors who are not employees within the meaning of the Employment Contracts Act. A non-competition clause can therefore be agreed more freely with the CEO and there is no obligation, for example, to pay compensation for the restriction period, unless this is expressly agreed in the CEO’s contract. In principle, the Employment Contracts Act does not apply to shareholders’ agreements either.
Note the difference with the prohibition of competing activities during employment
It is important to distinguish between a non-competition agreement after the termination of the employment contract and a non-competition agreement during the employment relationship. According to the Employment Contracts Act, during the employment relationship, an employee may not engage in activities in competition with his employer or perform work that is detrimental to the employer.
This prohibition during the employment relationship is directly based on the law and a breach of it can lead, for example, to liability for damages and possibly termination of the employment relationship. A non-compete agreement, on the other hand, extends beyond the termination of the employment relationship and always requires a written agreement and the conditions described above.
Remember that in order to view Eduhouse trainings, you must be registered as a user of the online training service. If you are not yet registered, you can do so in the OMA+ service under Webinars and trainings.
