Non-compete clause in the employment contract

A non-competition clause is a contractual agreement, which prohibits an employee from disclosing to the employer compete during or after employment. This can mean, for example:

• The employee may do not work for a competitor.
• The employee may do not establish their own competing company.
• The employee may not poach customers or business secrets.

It is important to distinguish between the legal prohibition during the employment relationship and the contractual non-competition clause after termination of the employment relationship.

Already without express provision in the contract employees are subject to a so-called Duty of loyalty. This states: During the existing employment relationship, the employee may give the employer do not compete - neither through sideline activities nor through own businesses that are in direct competition.

However, it is permissible:

• An activity outside the industry of the employer
• A secondary activity that not against legitimate interests of the employer

Anyone who violates the non-competition clause during employment risks a termination without notice and Claims for damages.

A post-contractual non-competition clause is only effective under certain conditions. The employer must adhere to clear legal requirements:

Requirements for an effective post-contractual non-competition clause:

• Written form of the ban
• Maximum running time of two years
• Obligation to pay compensation
• The ban must protect a legitimate business interest of the employer

The so-called Compensation for waiting time is at least 50 % of the last contractual remuneration received (including variable components such as bonuses or commissions) for the duration of the non-competition clause.

If the compensation regulation is missing or is too low, the prohibition ineffective - the employee may then switch to a competitor despite the clause.

Anyone who ignores an effective post-contractual non-competition clause must expect severe legal consequences:

• Repayment of the waiting allowance
• Claims for damages by the former employer
• Contractual penalties, if agreed in the employment contract

On the other hand, the employee can also „buy out“ of the non-competition clause“, by waiving the waiting allowance - although this is only legally possible under certain conditions.

In practice, many clauses on post-contractual non-competition clauses are Legally contestable. Common errors are:

• No or too little compensation
• Geographical or time restrictions that are too broad
• No concrete protection of a legitimate business interest

Employees should therefore not prematurely assume that they are bound by a non-competition clause. In case of doubt, it is worth Examination by a specialist lawyer for employment law - especially before a new employment contract is signed or self-employment is planned.

Are you unsure whether you can start a new job or set up your own company despite a non-compete clause? Or would you like to know whether your former employer is right to insist on compliance with the non-compete clause?

The law firm Haas und Kollegen GmbH in Eschborn specializes in employment law and provides you with competent and discreet advice on all issues relating to non-competition clauses. We review your contractual clauses, assess the effectiveness of non-competition clauses and enforce your rights - both out of court and in court.