Non-compete clause in labor law - When is it justified?

Excited by the fact that they are establishing an employment relationship, most employees do not attach much importance to the text of the employment contract itself, especially if it is a profession not significantly covered by positive legal regulations. Knowing this fact, some employers are inclined to include in the contracts whatever they consider useful for their interests. In accordance with the above, somewhere near the end of the text, one can often find a clause with the ominous name "Non-competition".

Non-compete clause is a relatively new institution in the national law. However, that fact did not prevent the mass use of the mentioned clause in legal transactions. The goal of the institute is the protection of innovative solutions and business contacts of the employer in relation to the employees. Although often applied, there is no particularly developed judicial practice on this issue, according to the Open Doors of the Judiciary website.


Determining the job in question

The non-compete clause is prescribed in Articles 161 and 162 of the Labor Law. It is prescribed that the employment contract can determine the jobs that the employee cannot do in his own name and on his own account, as well as on behalf of and on behalf of another legal or physical entity, without the consent of the employer. The cited provision stipulates that an employee cannot perform certain tasks in his own name or for others without the employer's consent. However, with the development of various internet platforms through which it is possible to find jobs that provide additional income for the employee (freelance jobs), as well as the absence of instruments through which the employer could prove the violation of this contractual provision, the application of the aforementioned article is called into question.

Acquiring new, special technological titles, business partners and information

A non-compete clause can only be added to the contract if there are conditions for the employee to acquire new, especially important technological know-how, a wide circle of business partners or to learn important business information and secrets by working for the employer. Defining particularly important technological knowledge, determining a wide circle of business partners, and determining the criteria on the basis of which the importance of business information and secrets is determined is determined in each specific case. Acquiring important technological knowledge and important business information, as well as contact with business partners, by the nature of the work, is characteristic of highly positioned persons in a certain company. In this regard, adding such a provision is more useful for contracts concluded with directors and other managers, than the employment contracts with other employees.

Territorial validity of the non-competition clause

Article 161 of the Labor Law stipulates that the general act and employment contract also determine the territorial validity of the ban on competition, depending on the type of work to which the ban applies. The mentioned provision is interesting from several aspects. First of all, there is the question of the effect of this provision in the case when the employer does not prescribe the territorial validity of the prohibition of competition, more precisely, whether in case of failure to define the territory of validity, the provision on the prohibition of competition produces legal effect at all. Another aspect is related to the above-mentioned topic of freelancers. Namely, by using various platforms for finding jobs that can be done all over the world with the help of the Internet, the justification for using the geographical validity of the non-competition clause can be found by determining the effect of the clause on a specific country, region or the whole world.

Violation of the ban and damages

In case of violation of the non-competition clause, the employer has the right to demand compensation from the employee. Prescribing the specific amount of damages in the contract itself is not relevant for its collection, considering that the specific amount of damages is determined by an expert in each specific case. Also, the employer bears the burden of proving that the damage occurred due to the violation of the clause.

Obligations of the employee after termination of employment

Labor law

employment contract

clause on protection of competition

protection of competition

freelance jobs

employer-employee relationship

labor relations