Non-competition clause: what is allowed? German lawyer information

Non-competition clause in employment contract: what is allowed?

No boss wants to let good employees go – certainly not if this employee is highly qualified and has confidential information about the company. With a post-contractual non-competition clause or a competition protection clause, a company can prohibit an employee from acting directly after his termination for the competition.

Whether in the pharmaceutical industry, the banking sector or in the publishing industry: In job advertisements highly qualified employees with a lot of work experience are searched everywhere, preferably under 35. Anyone who has special knowledge and experience, but often does not even have to apply, but is wooed. It is not always possible to move seamlessly into a new employment relationship. After all, post-contractual non-competition clauses can prohibit employees from acting for the competition for a certain period after their termination. Read here what is possible for employees and employers in this context.

Employment law: non-competition allowed for a maximum of two years

A non-competition clause for employees must be agreed in writing in the employment contract and signed by both sides. “In rare cases, a clause can be found in a contract according to which the employer reserves the right to conclude a post-contractual non-competition clause with the employee”, informs lawyer Reinhard Schütte, member of Arbeitsgemeinschaft Arbeitsrecht in Deutscher Anwaltverein (DAV).

For a maximum of two years, an employer may prohibit his employee from working for the competition. “Two years, however, are rather uncommon: competition protection clauses usually refer to the period of one year,” explains lawyer Schütte. In some cases, competition bans of half a year would be agreed.

Post-contractual non-competition clause only with payment in remittance

It is not in vain for the employer to pronounce a non-competition clause: For the agreed period of time, he must pay his former employee a so-called leave payment. This is a financial compensation for the disadvantages caused to the employee by the ban. It must be at least 50 percent of the previous contractual services. Otherwise, the clause is ineffective.

So for the employer, it wants to be well-considered whether he wants to impose a clause on competition protection for an employee. For this, however, it can at least financially pay off, if he finds work elsewhere, which is credited towards the benefits within certain limits.

Employee has few means against non-competition

“Since a compensation payment is very costly for the employer, it is increasingly rarely agreed,” says the lawyer from Wiesbaden. A non-compete would be worthwhile only with absolute know-how carriers, who could cause great damage as employees of the competition.

Of course, those who do not want to sign an employment contract with a non-competition clause do not have to. But it can happen that then the contract does not come off. If, during an employment relationship, a non-competition clause is to be agreed at a later date after dismissal, which is rejected by the employee, this will be less conducive to the relationship of trust.

Infringement of non-competition clause: contractual penalty and damages

If an employee violates a post-contractual and effective competition law and rises during the period of prohibition at a competitor, he is not threatened with criminal prosecution. Nevertheless, it can be very uncomfortable, since the employment contract usually provides for a contractual penalty for each case of non-competition. The employer may also prohibit competition by means of an injunction.

If disadvantages arise for the previous employer, for example because the rival company was able to bring a product to market faster through its former employee, it can also file a claim for damages in accordance with Section 280 of the Federal German Civil Code (BGB). Defendant is then not only the employee, but also his new employer.

Employer: Always inspect highly qualified applicants

Employers therefore take a high risk when hiring someone who violates a competition protection clause. It is therefore necessary to inform the employer about appropriate prohibitions or specifically to ask applicants.

“Applicants often have their competition bans checked before they start looking for a new employer,” says lawyer Schütte. Not infrequently, the clauses are ineffective because, for example, the compensation payment is too low, the competition ban is too broad or the duration of the period is too long. In this case, the employer could easily hire the applicant.

Conflict with the boss? Contact a lawyer for employment law

Have you signed a non-compete agreement and are therefore in conflict with your employer? Does your new employer want to include a competition protection clause in the employment contract, but you disagree? In these and other labor disputes, a labor lawyer can advise and assist you in finding the right solution.

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Christina Cherry
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