Compromise between employee and employer - words which apply to the institute of the competition clause.
Both parties make concessions where one provides financial compensation and the other tolerates a temporary restriction of the right. The statutory regulation can be found in §310 of Act No. 262/2006 Coll., the Labour Code. The latter states the following conditions for a competition clause:
In the first paragraph, it defines its maximum duration of one year and a minimum amount of monetary compensation equal to one half of the average monthly salary for each month of performance of the contract.
Subsequently, it provides that it may only be concluded if the employee, in the course of his or her work, has acquired information and knowledge from the employer that could harm the employer in the event of its competitive use by the employee.
The competition clause must be agreed in writing.
Furthermore, the Labour Code regulates the admissibility of an employer to withdraw from a competition clause in §310(4). This is precisely the issue that is addressed in the article. Specifically, it analyses the development within the case law.
The Labour Code and thus the provision on the non-compete clause must be interpreted in the intent of §1a (1) a), which guarantees the protection of the employee as the weaker party. It is at this point that the conflict of interpretation arises as to whether or not the withdrawal of the non-compete clause will be in the interest of protecting the employee himself? For, on the one hand, withdrawal from the clause deprives the employee of possible financial compensation, but on the other hand, it will not restrict him in his search for work. Having determined whether or not withdrawal is in the interest of the employee, it is then possible to assess whether we should be inclined towards an interpretation which makes withdrawal more or less possible.
On the basis of this interpretation, the following question can be answered; is there already a statutory general authorisation for the employer to withdraw from the clause without further delay in the case of section 310(4), or is it instead necessary for the parties to contractually agree on the possibility of withdrawal? Such an arrangement must be set out in writing in the clause; the law only acknowledges the possibility of withdrawal. This will enhance the protection of the weaker party.
However, the case law on withdrawal without providing a reason has historically varied depending on interpretation. Is it therefore possible to withdraw from the clause without stating a reason, while still protecting the employee, or not?
Decision of the Supreme Court No. 21 Cdo 4986/2010
The Supreme Court has ruled that "the employer and the employee may only withdraw from a non-compete clause for a reason set out in the law or for a reason agreed by the parties. The non-compete clause is in the interest and for the protection of the employee, and therefore an arrangement that would allow it to be terminated without giving a reason is inaccessible.
Constitutional Court ruling
The change in the above-mentioned practice of the Supreme Court was initiated by the Constitutional Court's ruling of 21 May 2021, No. II ÚS 1889/19, in which the Constitutional Court concluded, inter alia, that "the blanket case law prohibition of contractual arrangements entitling an employer to withdraw from a competition clause without stating a reason is a constitutionally non-conforming judicial refinement of the law".
It notes that the primary purpose of a non-compete clause is not monetary compensation provided to an employee for his disadvantage in finding new employment; it is aimed at protecting trade secrets. The employee is to the contrary disadvantaged by the clause in force. It is therefore in his interest (and therefore fulfilling the intent of Labor Code §1a(1)(a)) that the non-compete clause be withdrawn.
The impossibility of the employer unilaterally withdrawing from the competition clause 'without stating a reason' or 'for any reason' may also be regarded as an expression of a violation of the constitutionally guaranteed right to free choice of profession and training for it, as well as the right to engage in business and other economic activity (Article 26(1) of the Charter of Fundamental Rights and Freedoms).
"The employer has the right to withdraw from a competition clause without giving a reason if this possibility has been expressly agreed by the parties. This does not mean, however, that the employee, as the typically weaker party in the employment relationship, should not be afforded any judicial protection against potential arbitrariness or abuse of this right by the employer." The situation will be assessed on a case-by-case basis.
Theoretically, there is a rebuttable presumption that the employer's resignation was made in good faith, unless the employee objects to the contrary. The burden of proof is therefore on the employee.
Supreme Court replica
Following the aforementioned ruling, the Grand Chamber of the Supreme Court followed the decision of the Constitutional Court and in its judgment from 13 December 2023, No. 31 Cdo 2955/2023, completely changed the existing decision-making practice of the Supreme Court.
Withdrawal from a competition clause without stating a reason will be valid under the judgment only if the following conditions are cumulatively met:
- The possibility of withdrawing from a non-competition clause without stating a reason has been expressly agreed by the parties (see Section 2001 of the Civil Code);
- The withdrawal from the competition clause is made during the duration of the employment relationship (see §310(4) of the Labour Code);
- The withdrawal from the non-compete clause must pursue a legitimate aim and must not contravene the principle of protection of the employee;
- The employer's action is neither arbitrary nor an abuse of its contractual option to withdraw from the competition clause, and the specific circumstances of the case must be assessed in this respect.
Conclusion
We return to the term "compromise" used in the introduction. And not only in the sense of a concession, that is to say, a " compensation in exchange for restrictions" in the figurative sense of an imaginary "eye for an eye". But also as a compromise between two legal principles. A balance must be maintained between the principle of the autonomy of the employer's contractual will and the principle of the protection of the weaker party (here the employee). Between the admissibility of stipulating a non-compete clause without giving a reason and the abuse of such stipulation.