Prohibitions of competition in the employment relationship

• Employment Law
• Private Clients
• SME

You own a flourishing business. You have built up a lucrative customer base over many years. Your employee now decides to leave the company. Along with the employee, some of your customers follow. Can you defend yourself against this?

In principle, the employee must abstain from competing activities if the legal requirements for a valid non-competition clause are met. This requires a written agreement between the employee and the employer. The mere reference in the employment contract to a non-competition clause laid down in the personnel regulations is not sufficient. 

The non-competition clause is only binding if the employee is granted insight into the clientele or manufacturing and business secrets and the use of this knowledge could cause considerable damage to the employer. 

The non-competition clause is to be reasonably limited according to place, time and subject matter. In the absence of such limitation or if the non-competition clause is excessive, the judge may limit the non-competition clause at his discretion. It is important to note that the non-competition clause may only exceed three years in special cases.

The non-competition clause expires if the employer no longer has a demonstrable interest in maintaining it or if the employer terminates the employment relationship without the employee having given him/her good reason to do so. It also lapses, however, if the employee terminates the employment relationship for reasons for which his employer is responsible. 

It is a fine line, which is not always easy to discern in practice, which separates unlawful and permissible competition. The agreement of a contractual penalty can remedy this situation by discouraging the employee from taking up activities which could harm his former employer.

Contact: Roman Kälin-Burgy, Martin Boos