Time limit for withdrawal from a non-compete agreement must clearly specified

The ruling of the Supreme Court related to interpretation of an agreement  banning competitive activity after termination of employment relationship concluded between a bank and its ex-employee. A ban on undertaking competitive activities was to be in force for a year and further the parties stipulated in the agreement that it would cease to apply if the employer made a declaration releasing the employee from the obligation to observe such ban. A controversial issue appeared to be the period during which the employer had an opportunity to release the employee from the ban (which involved ceasing to pay him a fee amounting to 25% of the remuneration which the employee used to receive before termination of employment relationship).

The Supreme Court noted that the possibility of introducing the right of withdrawal into a non-compete agreement had been for a long time accepted in judicature on account of the content of article 395 of the civil code which is applied by reference in article 300 of the labour code. Certainly, granting the right to withdraw from a non-compete agreement may not stand in contradiction to the rules of labour law.

Nevertheless, validity of the provision concerning withdrawal from a non-compete agreement is conditioned on the time limit being set within which an employer can make a relevant declaration. Reservation of the right to withdraw from an agreement for an employer without setting the time limit shall not be valid.

In the opinion of the Supreme Court the said time limit can coincide with the period when the ban on competition is in force. However, it must directly appear from the content of an agreement. The provision of the agreement which is the matter of proceedings referring to the provision specifying the object and duration of the ban on competition, in the opinion of the Court was not clear and precise, and quite the opposite – raised doubts of an essential nature.

  • judgement of the Supreme Court of 10th February 2016, file ref No. I PK 56/16

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