Review of post-contractual non-compete clauses
A post-contractual non-compete covenant can considerably restrict your professional opportunities after you leave. Many such clauses are wholly or partly non-binding. We examine which obligations actually apply to you and what rights you have.
The key points at a glance
Formal requirements
A post-contractual non-compete covenant for employees is governed by §§ 74 et seq. HGB. It must be in writing, and you must be given a document signed by the employer. The covenant may be agreed for a maximum of two years after the end of the employment.
Compensation for non-competition
The covenant is only binding if the employer undertakes to pay compensation for its duration amounting to at least half of the contractual remuneration last received. If there is no undertaking to pay compensation at all, the covenant is generally void. If the compensation is too low, the covenant is non-binding. You may then choose whether to comply with it and claim the compensation.
Legitimate interest and scope
The covenant is non-binding to the extent that it does not serve to protect a legitimate business interest of the employer or unreasonably hinders your career. Other earnings are, under certain conditions, offset against the compensation. If the employer waives the covenant before the end of the employment, it remains obliged to pay for one year from the date of the waiver.
How we proceed
We examine the form, duration, geographical and subject-matter scope and the compensation undertaking, and determine whether the covenant is effective, non-binding or void.
We show you which activities you may take up, whether you have a right to choose and how to exercise it, and the financial consequences of each decision.
We negotiate with the employer on lifting or limiting the covenant and enforce claims to compensation for non-competition.
Frequently asked questions
Do I have to exercise my right to choose expressly?
In the case of a non-binding covenant, you should decide clearly at the start of the restricted period whether you will comply with it. This decision can be made by express declaration or by your actual conduct. Given the consequences, a written declaration after prior advice is advisable.
Do these rules also apply to managing directors?
§§ 74 et seq. HGB apply directly only to employees. Different standards apply to managing directors, and compensation for non-competition is not mandatory in the same way. Validity is then determined by general principles and must be examined separately.
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