Czechia: Employer’s right to withdraw from non-competition clause

 

 

According to the Labour Code the employer may withdraw from a non-competition clause only during the term of the employee’s employment law relationship. In the past the Supreme Court has already declared that the withdrawal is lawful only from reasons given by law or reasons agreed between the employer and the employee in the non-completion clause when such reasons do not constitute abuse of right to the detriment of an employee.

If a non-competition clause has been concluded, an employee agrees to refrain from the performance of a gainful activity that would be identical or compete with the employer’s objects of activities after termination of the employment (for a period not exceeding 1 year). An employer may agree on a non-competition clause with an employee if this can be fairly required from the employee with regard to the nature of the information, findings and knowledge of working and technological procedures that the employee obtained in employment with the employer.

General purpose for a non-competition clause is to safeguard the employer especially from leakage of information, which are specific (business important) for the employer. The Supreme Court accepts that within the employment relationship may occur circumstances which exclude or disqualify the employee from obtaining such information and which may create a reason for the employer’s withdrawing from the non-competition clause. If such circumstances are expected, the employer and the employee can agree them as a rightful reason for the withdrawal from the non-competition clause.

The subject of the court’s decision making was if a withdrawal from the non-competition clause is legitimate when it is based on the employer’s discretion whether the employee acquired (or not) information worth protection under the non-competition clause. The Supreme Court points out here that such a contractual provision under which it is in the employer’s discretion to consider whether the expected circumstances for withdrawal occurred, namely whether the non-competition clause is useful, does not comply with the law. According to the court it would be in its consequence similar to withdrawal without any reason or for any reason, which is contrary to law and invalid.

The Supreme Court comes to the conclusion that the regulation of the non-competition clause in the Labour Code is expressing one of the basic principles of employment law relationships, namely special statutory protection of the employee’s position. That is why the employer’s limitation to withdraw from a non-competition clause shall protect the stability of the employment relationship or restraining from the employee’s uncertainty about his/her further assimilation at the labour market.

Moreover, the Supreme Court finds the impossibility for an employer to withdraw from the non-competition clause without / for any reason (or from any analogically agreed reasons) in compliance with everybody’s constitutionally guaranteed right to the free choice of profession and the training for that profession, as well as the right to engage in enterprise and pursue other economic activity.

This decision of the Supreme Court is giving a signal that the Czech labour law is to keep its protective nature. Thinking about the stated grounds for such protection, it could seem excessive and the possibility to withdraw without effective application.

 

For further information, contact:

Andrea Krásná, Partner

Baroch Sobota, Prague

e: krasna@baroch-sobota.cz 

t: +420 2242 11130

 

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