Non-compete clause

A non-compete clause contractually prohibits an employee to take part in any competitive business for a certain time period following the termination of an employment relationship and is defined in the provisions of the Workers’ Statute (hereinafter ‘ZDR-1’). With a non-compete clause, the employer and employee agree that the employee will not seek to exercise the same business activity he performed for the employer for a certain time period following the termination of an employment relationship with this employer, or not to use technical, manufacturing or business knowledge and business connections he gained while working for or in connection with his work for this employer. The non-compete clause is regulated by Article 40 paragraph 1 of ZDR-1. Even though the non-compete clause is also regulated by two other articles (Articles 41 and 42 ZDR-1), meaning it is legally pretty accurately defined, some difficulties remain in practice and in my experience it is very hard to realize, especially in the part pertaining to the employee’s rights, if he is unable to secure an income due to obligations under the non-compete clause.

A non-compete clause contractually prohibits an employee to take part in any competitive business for a certain time period following the termination of an employment relationship and is defined in the provisions of the Workers’ Statute (hereinafter ‘ZDR-1’). With a non-compete clause, the employer and employee agree that the employee will not seek to exercise the same business activity he performed for the employer for a certain time period following the termination of an employment relationship with this employer, or not to use technical, manufacturing or business knowledge and business connections he gained while working for or in connection with his work for this employer. The non-compete clause is regulated by Article 40 paragraph 1 of ZDR-1. Even though the non-compete clause is also regulated by two other articles (Articles 41 and 42 ZDR-1), meaning it is legally pretty accurately defined, some difficulties remain in practice and in my experience it is very hard to realize, especially in the part pertaining to the employee’s rights, if he is unable to secure an income due to obligations under the non-compete clause.

If the employee gains technical, manufacturing or business knowledge and business connections during his employment, the employee and the employer can include a ban on exercising competitive business activities in the employment contract after the employment relationship is terminated. This is a matter of freedom of contract which is derived from general law of obligations. This is of course not the case in practice, as it is a fact that the employment contract is always drafted by the employer, who also includes a non-compete clause in the contract which the employee normally also accepts.