Definition
A post-contractual non-competition clause prohibits the employee from working for competing companies after the employment relationship has ended. It is only valid if the employer pays compensation amounting to at least 50% of the employee’s final annual salary. If this commitment is entirely absent, the non-competition clause is invalid. If the compensation falls below the statutory minimum, the employee has a choice: they may comply with the clause – or ignore it. Any income earned elsewhere is offset against the compensation. The employer may unilaterally lift the non-competition clause before the end of the employment relationship, but must then continue to pay the compensation for up to one year.
Specialist solicitor in employment law
With over 15 years’ experience in employment law
Classification under employment law
A post-contractual non-competition clause is only valid if the employer pays compensation amounting to at least 50% of the employee’s last salary (Section 74 of the German Commercial Code). In the absence of such an undertaking, the non-competition clause is non-binding on the employee – they may choose to ignore it or to adhere to it.
Distinction from related terms
Non-competition clause: The non-competition clause prohibits the employee from engaging in certain activities after the end of the contract. The compensation is the financial consideration for this restriction.
Contractual penalty: The contractual penalty becomes payable if the non-competition clause is breached. The compensation, on the other hand, is paid regardless of any breach.
Practical tip
A non-competition clause without compensation for the period of non-competition is not automatically void, but rather non-binding – which means that you decide whether or not to comply with it. This opens up tactical opportunities that should be exploited with the help of a solicitor.
