Non-competition clause employment contract
Everything about non-competition clauses and compensation in employment contracts.
Here you learn ...
what non-competition clauses under employment law are
when you are entitled to compensation
what you can do against non-compete clauses
Table of Content
1. Non-competition clause in the employment contract
2. Compensation for non-competition clause
3. Circumvention of the non-competition clause
4. Conclusion
1. Non-competition clause in the employment contract
The non-competition clause under labor law is an important consideration for many employees when terminating an employment relationship – especially if they work in a specialized industry or in a management position. The basic rule is: During the ongoing employment relationship, the employee is subject to a statutory non-competition clause . This means that they may not compete with their employer, in particular, they may not take up their own employment or work for a company that is in direct competition with their employer (analogous to Section 60 of the German Commercial Code).
However, this topic becomes particularly relevant with regard to the so-called post-contractual non-competition clause ( Section 110 of the German Trade Code ). According to the post-contractual non-competition clause, the employee may not compete with the employer for several months even after the employment relationship has ended. However, the post-contractual non-competition clause must be expressly stipulated in writing in the employment contract or in a separate agreement (Section 74 of the German Commercial Code). Without such a clause, there is generally no obligation to restrict oneself under competition law after the employment relationship has ended.
2. Karenzentschädigung Wettbewerbsverbot
Die Karenzentschädigung ist eine zentrale Voraussetzung für die Wirksamkeit eines nachvertraglichen Wettbewerbsverbots. Ohne die Zusage einer angemessenen finanziellen Entschädigung ist die Vereinbarung in der Regel unwirksam. Die Höhe der Karenzentschädigung muss mindestens 50 Prozent der letzten vertragsmäßigen Leistungen des Arbeitnehmers betragen (§ 74 Abs. 2 HGB). Dazu zählen nicht nur das Fixgehalt, sondern auch etwaige Sachbezüge und variable Vergütungsbestandteile, sofern diese regelmäßig gewährt wurden.
Employees should consider whether the agreed compensation complies with legal requirements and whether the non-compete clause unreasonably restricts their professional development. In many cases, it is possible to opt out of the post-contractual non-compete clause by declaring it to the employer, but this is subject to a time limit and should be carefully considered.
3. Circumvention of the non-competition clause
If you are unintentionally bound by a non-compete clause, this does not mean that you must remain completely inactive. Employees are permitted to prepare for future competitive activity while still employed. As part of this preparation, they may, for example, establish a company, register an internet domain, rent business premises, or conclude employment contracts without violating the non-compete clause . A violation of the non-compete clause only occurs when external advertising influences the market.
It should also be noted that the validity of the non-competition clause requires that the employer actually pays the compensation . The employer cannot demand compliance with an agreed post-contractual non-competition clause if it itself violates its contractual obligations. A breach of good faith occurs, for example, if the employer demands compliance with the non-competition clause but simultaneously fails to pay the contractually owed compensation for several months (LAG Mecklenburg-Vorpommern, judgment of August 4, 2014 – 2 SaGA 3/14, BeckRS 2014, 72301).
Summary of this Page
The non-compete clause protects employers from competition from (former) employees. It is legally valid during the employment relationship; after the termination of the contract, it only applies if there is a written agreement with a non-compete compensation. This must be at least 50% of the last salary. Preparations for future competition are permitted as long as no market participation occurs. Without payment of compensation, the employer cannot enforce the non-compete clause.
