Post-contractual non-competition clause

What should be considered when drafting the contract?

from
Jan Waskow
Lawyer
Specialist in labor law

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During an existing employment relationship, employees are subject to a so-called non-competition clause. This means that employees are not allowed to compete with their current employer.
This is justified by the employee's duty of loyalty to his or her employer (§ 60 HGB analogously). A violation of the non-competition clause can result in a written warning, and in more serious cases even in (behavior-related) termination. In addition, the employer may be entitled to claim damages from the individual employee.

Non-competition clause after termination of the employment relationship

After the termination of an employment relationship, an employee is generally free to enter into an employment contract with a new employer (even if it is a competitor of the previous employer) or to compete with the previous employer. In principle, there is no post-contractual competition law.

Statutory provisions for post-contractual non-competition

If the previous employer wishes to agree a non-competition clause that extends beyond the termination date of the employment contract, this is possible. The legal requirements for such a post-contractual non-competition clause are set out in §§ 74 et seq. HGB. These provisions apply to all employment relationships via § 110 GewO.

Requirements for the effectiveness of a post-contractual non-competition clause

The agreement of a post-contractual non-competition clause is subject to strict requirements:

In particular, the written form requirement from § 74 para. 1 HGB applies to the validity of a post-contractual non-competition clause. A violation of the written form requirement already leads to the invalidity of the provision (§ 125 BGB).
In addition, the post-contractual non-competition clause may be agreed for a maximum period of two years (§ 74 a para. 1 HGB). Furthermore, a so-called
compensation in favor of the employee must be contractually provided (§ 74 para. 2 HGB). This means that the non-competition clause is non-binding if the employer does not undertake to pay compensation for the duration of the prohibition, which for each year of the prohibition amounts to at least half of the contractual services last received by the agent.
Justified business interest: Finally, according to the applicable case law, a justified business interest of the employer is absolutely necessary for the conclusion of a post-contractual non-competition clause.

Consequences of an effective post-contractual non-competition clause

An effectively agreed post-contractual non-competition clause means that the employee is obliged to refrain from competing with their previous employer to the extent previously specified, even after the contract has ended. If the employee violates the post-contractual non-competition clause, the employer does not have to pay the compensation. In addition, the employer can assert claims for information, injunctive relief and even damages against the employee.

Please do not hesitate to contact us if you have any questions on this topic.

The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.