Non-competition agreement.

The provisions of the Labour Code provide for additional protection of the employer’s economic interests, which is expressed through the possibility of applying a non-compete agreement towards employees. Pursuant to the legal provision, to the extent specified in a separate agreement, an employee may not engage in activities that compete with the employer or provide work under an employment relationship or on any other basis to an entity involved in such activities.

As the above implies, an employer may establish a non-compete in writing with the employee in a separate agreement. In practice, however, it is often the case that the non-compete is not a separate agreement, but merely a separate paragraph in the employment contract (a competition clause).

An important issue concerning the above, from both the employer’s and the employee’s perspectives, is the possibility of a non-compete agreement applying both during the term of the employment contract and after its termination or expiry.

Elements of non-compete provisions.

Under current legislation, a non-compete agreement must be in writing under pain of nullity. In practice, it is possible to come across non-competition provisions included both as a separate agreement, a clause included in the employment contract and an annex to the employment contract. Regardless of the type of conclusion of the non-competition agreement, the above-mentioned form requirement must be complied with. Binding non-compete provisions should include provisions governing the following:

• specify the parties to the contract,
• the duration of the agreement (whether the agreement will apply only during the employment contract or also after the end of the employment relationship),
• the scope of the non-compete clause (areas of activity in which the non-compete clause will apply – possibly specifying branches of business, entities competing with the employer, etc.),
• determining the amount of compensation due to the employee in the event that the non-compete is also to apply after the end of the employment relationship.

Importantly, regardless of the type of non-compete agreement entered into, it must be between two parties, the employer and the employee, and cannot take the form of a unilateral statement by the employee agreeing to the non-compete. Such a unilateral statement, being the sole basis for a non-compete, has no legal effect with respect to either the party making the statement or the party to whom it is addressed.

Non-competition after termination of employment.

A non-compete, as already indicated above, may also apply to an employee after the termination of the employment relationship, regardless of the form of termination. According to the statutory provision, to the extent set out in a separate non-competition agreement after the termination of the employment relationship, an employee may not engage in any activity that competes with the employer or provide work under the employment relationship or on any other basis to an entity engaged in such activity when the employer and employee have access to particularly important information, the disclosure of which could expose the employer to harm.

However, special attention should be paid to the fact that a post-employment non-compete agreement must have appropriate compensation paid to the employee by the employer. The amount of compensation for refraining from competitive activity cannot be less than 25% of the remuneration that the employee received before the termination of employment for the period corresponding to the period of non-competition. In addition, the parties may agree that the compensation will be paid in monthly instalments. A non-competition agreement after the termination of the employment relationship should be concluded for a fixed period of time. Consequently, an agreement providing for compensation of less than 25% of salary and/or an agreement for an indefinite period of time will be void.

Furthermore, a non-competition agreement after the termination of the employment relationship, ceases to be in force before the expiry of the term for which the agreement was concluded, in the event that the reasons justifying the non-competition cease to exist or in the event that the employer fails to fulfil its obligation to pay compensation. It should be pointed out, however, that if the aforementioned circumstances occur, only the employee’s obligation to refrain from competitive activities towards the employer expires, and not the employer’s obligation to pay the agreed compensation.

Breach of non-compete.

In the case of a breach of the non-competition clause, the employer who has suffered damage as a result of this breach by the employee may claim compensation for this damage from the employee under the principles set out in the Labour Code. Consequently, in the case of an employee who caused damage to the employer by breaching the non-competition clause unintentionally, the compensation for the employer may amount to a maximum of three times the employee’s salary. On the other hand, in the case of an intentional violation of the non-compete by the employee, the employee will be obliged to compensate for the damage caused in full.

Withdrawal from a non-compete agreement.

According to a recent Supreme Court ruling of 12 June 2024, ref. II PSKP 52/22, a non-competition agreement after termination of the employment relationship is a typical term contract. Consequently, the parties may, by agreement, at any time, terminate or amend the non-competition agreement. Moreover, the parties may introduce into the content of such an agreement the right to withdraw from it, with a period of use of such right.