April 30, 2018
Authored by: Michael Magotsch
There are few clauses in employment contracts more heavily debated than Non-Competition Clauses (post-contractual non-competes). While employers tend to include them rather easily in order to protect company secrets beyond the term of an employment, strict and mandatory provisions under German law differ from those found in most other jurisdictions. For post-contractual non-competes to be enforceable, an entire catalogue of requirements must be met, including a mandatory compensation payment of at least 50% of the employee`s total earnings for the maximum term of two years – to name just the two most prominent requirements. Because of the potential financial impact on employers, it is highly advisable to carefully consider whether post-contractual non-competes are necessary at all and, if so, whether they will be enforceable.
Two recent decisions in January 2018 by the Federal Labor Court/ BAG (10 AZR 392/179) and by the Appeals Court/ LAG Düsseldorf (Az: 7 Sa 185/17) are worth noting:
“Vorvertrag” – Keeping your options open
It is a common situation (and sometimes a true dilemma) for the employer to decide at the beginning of the employment relationship whether to agree on a post-contractual non-compete. While it is easy at that point to negotiate a non-compete, the employer might not be sure whether the circumstances and the unclear future developments justify the investment in a (potentially) costly non-compete. LAG Düsseldorf confirmed that it could be valid for an employer to agree on a post-contractual non-compete in the form of a preliminary contract (“Vorvertrag”) that grants the employer