Non-competition clause

A non-competition clause can be inserted in a Work contract in order to prevent, at the end of the contractual relation, that the employee does not compete with his former employer. It can appear useful for example for the employer anxious to preserve the customers created or managed by its sales representative when that leaves the company. It is noted, generally, that the conditions of validity and implementation of this clause differ only slightly from one country to another.

The non-competition clause in German right

The German right imposes the drafting of a writing for the non-competition clause. The parts must have signed it and have accepted (paragraphs 74 of the HGB and 126 of the BGB.) These formalities are obligatory under penalty of nullity of the clause

In the same way, the clause will be null if:

the employee is minor at the time when it contracts engagement (paragraphs 74a subparagraph 2 of the HGB and 133f subparagraph 2 GewO). An authorization of the legal representative of the minor before or after the signature of the contract, does not make it possible to avoid nullity
the employee is in professional training. Two exceptions however are envisaged. A non-competition clause can be signed during the last three months of a professional training if the employer commits himself concluding an employment relationship at unlimited duration with the person who profits from professional training or when the employer commits himself concluding an employment relationship at limited duration from a five years maximum with the person who profits from professional training, like supporting the expenses of a professional training complementary different from initial training within a reasonable limit have regard to the duration of engagement.
the employee perceives an annual remuneration lower than 1500 marks. Only the remuneration perceived by the employee at the time when it contracts the engagement of not-competition must be taken into account to determine if it reaches or not the legal threshold
Under the second sentence of the § 74a, Al 2 HGB, the prohibition of competition is null if the employer makes some promise the respect on the honor or by any other similar engagement.
a third cannot be committed respecting the clause in the place of the employee.

In addition, the clause should not be sullied with a defect of the assent. In other words, the meeting of the wills of the parts must be carried out without fraud (i.e. without operations aiming at misleading concontractant it); the assent must free (unconstrained nor violence) and be lit (with full knowledge of the facts, by an able person.) Moreover, the contracting one should not have accepted by error. Among the errors devoted by the BGB, the error on essential qualities of the person is likely to be made in the framework of a work contract when one of the parts is mistaken on the formation, professional competence, the health condition, the conscientiousness or the correction from its contracting 68.

The financial counterpart whose been the object the non-competition clause must be equivalent at least to half of the last wages of paid the employer must in addition refund in Bundesanstalt für Arbeit (federal Office of work) the services unemployment poured at the former wage earner who sees limited by contract his professional liberty of action.

Lastly, German jurisprudence regarded as abusive, certain non-competition clauses. Thus, the BAG considered that of a prohibition of prohibited competition certain clauses were constitutive making depend on the only decision of the employer the possibility of future competition of the employee.

The non-competition clause in English right

The non-competition clause in English right follows rules similar to those of the French right. Thus, the clause must be justified by the interest of the company, limited in time and space, and justified by the employment of the employee. (It goes without saying that to impose a non-competition clause on a window cleaner for example, appears abusive, have regard to the nature of the carried on activity).

The clause can be revised (modified during the execution of the contract or at the end of the contract), but with some limiting:

the revision should relate to only one point without much importance or of technical order
it should not finally require a too important modification of the old clause (one does not have for example, to add new terms to it)
, it should not bring limits to the freedom of the trade and industry

It will be noted that in English right on the other hand, unlike the French right, the clause will be inapplicable in the event of abusive layoff.

The non-competition clause in Belgium

The definition of this clause in Belgian right is appreciably similar to the French definition. The same applies to its conditions of validity: it must be noted in writing, to be limited in time (12 months maximum for the Belgian right), to be limited in space (not to extend in-outside Belgium) and to envisage a single and contractual financial counterpart by the employer of a minimal amount equal to half of the rough remuneration of the worker for the period covered by the aforementioned clause. A notable difference with the French right is however to underline; thus, the clause can apply only to workers having a remuneration higher than a ceiling fixed by the law.

The mode of the clause in Canada and Quebec

The restrictive clauses are in theory prohibited in the work contracts (and thus considered null). In the stop Elsley C.J.G. Hakes Insurance Agencies Ltd of 1978, the Supreme court of Canada fixed the conditions of validity of such a clause. Thus, the clause must:

to be justified by the interest of the employer
to be limited in time and space
to the difference of the Belgian right or the French right, the Canadian judges fixed one 3rd condition: the clause must prevent competition in a general way. I.e. it should not be restricted to prevent the former wage earner from adapting the customers of his employer (it would be enough to insert in the contract what the Canadian right names " clause of non-sollicitation").

As the decision returned by a Québécois court reflects it on August 3rd, 2005 (business Public Positron Safety Systems Inc. v. Cardoso), the non-competition clause in Quebec follows a mode similar to that of Canada.

The non-competition clause in Spain

In Spain, the non-competition clause is governed by article 21 of the law on the statute of the workers.

This clause can be accepted with the signature of the contract, in the course of execution or at the end of this one.

Certain conditions of validity are necessary. Thus, the clause:

must be justified by the interest of the company (industrial or commercial interest real)
must be the subject of a versed financial counterpart to paid the

Some characteristics are however to underline:

the clause cannot exceed 2 years for the technicians and 6 months for the other workers
a decision returned by the Supreme court on January 21st, 2004 imposes on the employer who would wish to give up the clause to show of it the absence of commercial or industrial interest real.

The non-competition clause in France

The Clause of not-competition has as a principle which an employer can legitimately wish that the worker does not put himself at the service of a competitor. On this assumption, it must prohibit to him by convention. This one can be agreed at the time of the engagement or during the execution of the contract, and even subsequently to the rupture of this one. The non-competition clause is that by which the employee prohibits himself, at the time of its departure of the company and during a certain time thereafter, to carry on certain activities likely to harm its former employer. It is inserted in the work contract or is imposed by the collective agreement.

Note:: the non-competition clause is different from the clause of exclusiveness

The clause must obey in basic conditions and forms these conditions are in particular defined by three stops of principle of the French Court of appeal of July 10th, 2002: “waited until a clause of noncompetition is licit only if it essential to the protection of the legitimate interests of the company, is limited in time and the space which it takes account of the specificity of the use of paid and comprises the obligation for the employer to pay to paid financial counterpart, these conditions being cumulatives". These 4 conditions all must thus be filled, without exception, under penalty of nullity of the clause.

It must be justified by the legitimate interests of the company : It is necessary that the company is likely to suffer a real injury if the employee has suddenly carried on his community activity in a concurrent company.
the contact with the customers, the access to sensitive informations on the company or the access to knowledge to make clean are indices being able to involve a risk of competition.
It must be limited in time and space:
La period adopted by the majority of the Collective agreements is two years.
La space limit is the place in which the employee can be in a real competition with the employer. It differs according to the type of acticvity concerned. It can be a question of a department or an area. Thus, as example, a dressmaker in Toulouse will not be able to see herself imposing a non-competition clause extended to all France; that would be regarded as abusive. A judged clause " raisonnable" he would prohibit for example to carry on any activity likely to compete with its former employer in the only Midday-Pyrenees zone. The appreciation of the abusive character or not of the clause raises however capacity of the courts dealing with the substance of a case.
It must comprise a financial counterpart : It generally equal to 30% of the rough monthly average of the compensation of employees the last twelve months (or 6, or the last 3 months). The Court of appeal comes today to reinforce the protection of paid on which one imposes a clause of noncompetition, by specifying that this financial counterpart is due only fact of the suspension of the employment relationship, whatever the mode of rupture of the work contract. The financial counterpart cannot depend only on the duration of the employment relationship and its payment cannot intervene before the rupture because it has the aim of compensating the employee. In the absence of counterpart, the clause considered null and is not written.
It must take account of specificities of the use of paid and the possibility for the employee of finding a employment: It is taking into consideration specificity of the use of paid which must appreciate the duration and the territorial or professional extent of prohibition and the proportionality of the financial counterpart.

It is also known that:

the voluntary suspension of line of business does not cause automatically to discharge the employee from his obligation of not-competition.
only the employee can call upon the nullity of the non-competition clause not envisaging financial counterpart
any clause of noncompetition not envisaging financial counterpart opens financial claim
the time of renunciation of the non-competition clause runs as from the date of significance of the rupture
the late exemption of the obligation of not-competition does not discharge the employer from his obligation to compensate the employee.

Of course, like any clause of the work contract, the non-competition clause is seen subjected to the article L. 121-1 of the Labor regulation, which indicates that the work contract is subject to the rules of the general right of the obligations (contained primarily in the Civil code). That implies in particular the absence of vice assent.

The judge can decide to reduce the duration of a non-competition clause if he considers it excessive.

The non-competition clause in Romania

The law the labor Rumanian is governed primarily by the Rumanian Labor regulation adopted in 2003 (but whose implementation really effective took several years).

The non-competition clause as for it is governed by article 20-4 of the Rumanian labor regulation. It is subjected to financial counterpart: the employer must pay to paid monthly compensation equalizes at least with the quarter of his wages. The clause remains applicable during all the execution time of the work contract and during:

2 years maximum for the people having occupied a maximum management position
6 months for those which occupied a station of execution.

If the rupture intervened for a foreign reason with paid or simply of right, the clause would not produce effect.

Clauses of the work contract
Assent in French civil law

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