Post-contractual non-competition clause in employment law

• Employment Law
• Private Clients
• SME

The post-contractual non-competition clause is a key instrument in Swiss employment law that affects employers and employees alike. It is intended to prevent employees from directly competing with their former employer after the end of their employment relationship and exploiting sensitive information or business contacts in the process. But which regulations apply exactly? And what rights and obligations do both parties have?

Definition and purpose

A non-competition clause is a contractual agreement that prohibits the employee from competing with the former employer for a certain period of time and in a certain geographical area after termination of the employment relationship. The main purpose of this regulation is to protect the employer’s business interests, particularly with regard to business secrets, customer relationships and know-how. The non-solicitation of employees by the departing employee may also be covered by this contractual agreement.

Legal basis

The non-competition clause is regulated in Art. 340 to 340c of the Swiss Code of Obligations (CO). These articles set out the framework conditions under which a non-competition clause is permissible and enforceable.

Requirements for an effective non-competition clause

For a non-competition clause to be legally effective, the following requirements must be met:

• Written agreement: the non-competition clause must be recorded in writing.
• Knowledge of clientele or business secrets: The employee must have had access to information during their employment, the use of which could significantly harm the employer.
• Reasonable restrictions: The prohibition must be reasonable and necessary in terms of time, place and subject matter to protect the legitimate interests of the employer.

Duration and geographical restriction

The non-competition clause must not excessively restrict the employee’s professional activity. In general, a duration of up to one year is considered appropriate, but in exceptional cases it may be longer. The geographical restriction must extend to the area in which the employer actually operates and where it has interests worthy of protection.

Compensation

In many cases, compensation is agreed for the duration of the non-competition clause in order to compensate the employee for the restrictions. However, this compensation, also known as compensation for non-competition, is not mandatory.

Enforcement and sanctions

If an employee breaches an effective non-compete clause, the former employer can take various legal steps, including

• Claims for damages: The employer can claim for the damages incurred.
• Contractual penalties: The employment contract often provides for contractual penalties in the event of a breach of the non-competition clause.
• Interim injunctions: The employer can demand that the competing activity be stopped in court.

Cancellation and challenge of a non-compete clause

A non-competition clause may be invalid or rescinded in certain cases, for example if

• The employer terminates the employment relationship: In this case, the non-competition clause generally becomes invalid, unless the employee is at fault for the termination.
• Disproportionality: The non-competition clause is disproportionate and unreasonably restricts the employee’s professional activity.

Conclusion

The non-competition clause is a complex and sensitive issue. It offers employers important protection against unfair competition, but must be carefully and proportionately drafted in order to be permissible. Both employers and employees should obtain comprehensive information about the legal framework and consequences of a non-competition clause before concluding an employment contract. In case of doubt, it is advisable to seek legal advice to ensure clarity and legal certainty.

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