Post-contractual non-compete

Post-contractual non-compete obligation must not cover all activities for a competitor

In an indicative ruling dated August 02, 2018, the Higher Regional Court Munich (docket number 7 U 2107/18) has found that a post-contractual restraint which prohibited a managing director from working for a competitor in any way was invalid due to the lack of legitimate interests of the company. The managing director was therefore able to legitimately claim the invalidity of the non-compete obligation in the form of a preliminary injunction. The indicative ruling is …

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Act of defiance or effective waiver of rights?

Due to the compulsory compensation payments, post-contractual non-competes are only common in Germany with regard to key employees with significant knowledge of the employer’s business or close client relationships. However, they are quite often the subject matter of legal disputes. Just recently the Federal Labour Court (Bundesarbeitsgericht, BAG) has ruled on the question of the effective revocation of a non-compete (31 January 2018; docket number: 10 AZR 392/17). In the case at hand, the plaintiff …

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Penalty clause unenforceable where non-compete obligation is invalid

If a post-contractual non-compete obligation is invalid and therefore non-binding, a penalty clause intended to protect this clause is unenforceable (judgment of the Solingen labour court dated 20 June 2017, docket number 3 Ca 153/17). The employee worked for a travel agent and had mainly sold cruises. The employee’s contract included a post-contractual non-compete obligation for the duration of three months post-termination.  After leaving the company, she joined another travel agent. Under statutory law, a …

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Non-compete clauses – No Compensation for Abstention – Severability Clause

Non-compete provisions valid for the period after an employment relationship has ended are invalid unless the agreement provides for a compensation payment of 50% of the employee’s former salary during the entire duration of the post-contractual non-compete obligation. This decision by the German Federal Employment Court (docket no. 10 AZR 448/15, dated March 22, 2017) was made after a plaintiff filed a claim for monthly compensation for abstention after she had her employment contract terminated. …

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