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Termination of non-competition clause in employment agreement

13. 3. 2024 Igor Pieš Labour law

The Supreme Court recently decided a dispute arising out of a noncompete clause between an employee and an employer. The non-competition clause was agreed as part of the employment contract, but the employer reserved the right to unilaterally cancel the arrangement if it assessed that, given the experience and knowledge the employee had gained in the job, it did not consider a non-competition clause necessary.

The employee delivered his notice of termination in 2016. The employer cancelled the non-competition clause, but only after more than 2 months, just days before the expiry of the notice period. The employee subsequently sought compensation for compliance with the non-competition clause as, although the employment relationship was still ongoing, the non-competition clause restricted him from choosing new employment.

The Supreme Court concluded that an employer generally has the ability to negotiate a unilateral withdrawal from a non-competition clause. However, the employer may not act arbitrarily or abuse the option of cancellation. Thus, in this case, it is irrelevant whether the employee has acquired the required knowledge or not. What matters is that the employer has pursued a legitimate aim. In this case, the employee delivered his notice in order, among other things, to set up his own business and the employer did not want to restrict him in this respect. Thus, the employee was unsuccessful in his claim and had to pay the employee’s cost for legal representation, among other things.

This decision develops current court decisions. If you would like to consult on existing or potential non-competition clause disputes, please do not hesitate to contact us. We deal with these disputes quite frequently and are able to assist you effectively.

Mgr. Igor Pieš partner

igor@kastnerpies.cz