Non-compete clause under new rules

Non-compete clause, i.e. the prohibition to provide work or services for another entity, is a solution often used to protect the interest of the employer. The non-compete clause may be reserved for the duration of the employment relationship or after its termination. In practice, the non-compete clause was most often included in the employment contract for the entire duration of the contract and in the case of employees with access to particularly important data, it was extended – for remuneration – for a specified time after the termination of the employment contract.

The amendment to the Labour Code, which entered into force on 26 April 2023, clarified the rules for applying the non-compete clause in employment contracts limiting the employer’s rights in this regard.

According to the new Art. 26¹ of the Labour Code, the employer may not prohibit the employee from simultaneously remaining in an employment relationship with another employer or from remaining in a legal relationship that is the basis for the performance of work other than an employment relationship. An exception is the conclusion of a separate non-competition agreement pursuant to Art. 101¹ of the Labour Code.

A non-compete agreement for the duration of the employment relationship must be concluded in writing in order to be valid and must regulate issues related to the employee’s activities that are competitive to the employer and the provision of work under an employment relationship or on a different basis for the employer conducting competitive activities.

Violation of the prohibition set out in such a separate agreement allows the employer to claim compensation from the employee on the terms set out in the provisions of the labour law relating to the employee’s liability for damage caused to the employer. This means that the employer is entitled to compensation in the full amount only if the damage was caused by the employee intentionally.

Another exception to Art. 26¹ of the Labour Code is the prohibition of  competition on the basis of separate provisions of law. This applies, among others, to public officers, member of the civil service corps or members of management boards who cannot engage in competitive business without consent.

The rules regarding non-compete agreements after termination of employment concluded with employees who have access to particularly important information, the disclosure of which could expose the employer to damage, are still regulated in Art. 101² of the Labour Code. The conclusion of such an agreement entails the obligation to pay additional remuneration to the former employee for the specified time of its validity. In the event of a breach of the non-compete clause by a former employee, the scope of liability for damages is not limited, and therefore the compensation for the damage caused to the former employer is made in full and in accordance with the general principles of civil law.