Prohibition of competitive activity during the employment relationship is a common tool used by employers to protect their interests in the event of disloyal behaviour of an employee aimed at causing damage or even disadvantage to the employer during the employment relationship

Here are some important issues that every employer should keep in mind when deciding to protect their interests by entering into a non-competition agreement with an employee.

What is the competition?

The word competition comes from the Latin “concurrentia” meaning competition. It defines rivalry in order to achieve a goal in the fight for sales markets or to win customers with a simultaneous effort to gain an advantage. It is very often defined as a mechanism by means of which the participants of the management process on particular markets strive for the greatest possible benefits.

The Supreme Court states that establishing the state of competitiveness requires a comparison of the types of the statutory activity in question, the territorial area and the circle of recipients of the services provided, as well as verification of the use of the acquired knowledge, professional experience and skills (know-how) of the manager of a specific industry in the new employment, even if these companies have implemented joint investment projects.

How can an employer protect his interests?

The conclusion of an employment contract with an employee may depend on the simultaneous conclusion of a non-competition agreement. An employee’s refusal to accept a proposal to conclude such an agreement, submitted by the employer during the employment relationship, may justify termination of the employment contract, unless it is inconsistent with the Code (judgment of the Supreme Court of 3 November 1997 and PKN 333/97).

Form and content of the non-competition agreement

A non-competition agreement requires a more or less detailed definition of the competitive activities that the employee should avoid. It is the employee’s responsibility to ensure that the new employment does not breach the non-competition agreement. For this reason, its scope should be clarified in such a way as to enable the employee to effectively assess and determine whether the work performed constitutes a breach of the prohibition binding on him/her.

Pursuant to Article 1011 § 1 of the Code of Civil Procedure “an employee may not conduct an activity competitive to the employer or provide work under an employment relationship or on any other basis for the benefit of an entity conducting such activity” to the extent specified in a separate agreement. The notion of a “separate agreement” does not, however, mean a separate document, but it is an emphasis that the non-competition agreement is the so-called autonomous clause, supplementing the rights and obligations of the parties to the employment relationship. Thus, a non-competition agreement (clause) may be included in the same document as the employment contract, subject to its treatment as a separate legal act (the separation of a non-competition agreement from the employment contract allows for the application of the sanction of nullity of that agreement in the case of its conclusion illegally, in particular in the case of defective representation, none of the parties may unilaterally change the content of the non-competition relationship).

A non-competition agreement may not be concluded implicitly. The written form has been reserved for non-competition agreements on pain of nullity. For this reason, any arrangements between the employer and the employee aimed at establishing a non-competition agreement, but not confirmed in writing, will not bring the intended legal effects.

Non-competition agreement and prohibition of other work

Although the literature allows the conclusion of an agreement prohibiting an employee from performing any additional employment during the employment relationship, this is not reflected in the case law. According to the adopted interpretation, the broadly understood principle of freedom of contract is restricted under Article 18 § 1 of the Code of Criminal Procedure In this aspect, the prohibition of additional activity beyond the competitive activity is illegal and therefore invalid (judgment of the Supreme Court of 2 April 2008, II PK 268/2007).

Cessation of the ban on competition

Upon termination or expiration of the employment relationship, the ban on conducting competitive business by the employee ceases. The parties to the non-competition agreement may also determine the conditions for its early termination, in accordance with the applicable principle of freedom of contract, as well as decide to conclude another non-competition agreement applicable after the termination of the employment relationship.