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Studio Legale BraggionAvvocati Italian lawyersItalienische RechtsanwälteAvocats italiens

Non-competition agreements in respect of labor contracts

Avv. Antonio Braggion

Introduction

Non-competition agreements that are intended to restrain the activity of an
employee after his resignation from the company must comply with
the rules laid down by article 2125 of the Italian Civil Code.

An agreement is void, if it does not comply with the following requirements:

  • the agreement must be made in writing;

  • the agreement must be reasonably restricted
    in respect of its object, duration and place;

  • the employee must be granted appropriate compensation.

Object

As a general rule, the agreement must allow the employee to carry out, after the
termination of his labor contract, an activity sufficient to earn enough, to cover his personal necessities and those of his family.

The agreement can prevent the employee also from carrying out activities, which are
carried out by the employer, but not are not within the duties of
the employee.

Duration

The maximum term applicable to executives ("dirigenti"), employees and
workers is five, three and two years, respectively.

Place

An agreement applying to the whole territory of Italy has been regarded as valid but, in
other cases, it was considered unlawful on the ground that the agreement practically prevented the employee from finding another job and, therefore, from earning a salary having the characteristics previously mentioned, or because such a
territorial extension was not justified by a real interest of the employer.

An agreement covering all the European countries was declared unlawful; the same
conclusion was reached in the case of an agreement applying to both Switzerland and Italy and, in general, to any other country where, even in the future, the former employer may appoint a distributor or a licensee.

Compensation

As to the possibility that the compensation consists in a percentage of the salary paid
to the employee, instead than of a lump sum, the following decisions should be considered:

  • compensation amounting to 20% of the salary paid for all the time of duration of the labor relationship was considered sufficient;

  • the same system of calculating the compensation was not considered sufficiently determined, because it depended from the duration of the contract;

  • compensation corresponding to 15% of the salary paid to the employee was considered valid;

  • the amount of the compensation should depend on the difference between the quality and the quantities of the professional activities that the employee is allowed to carry out after the termination of his labor contract, and the activities
    which he could have performed in the absence of the agreement;

  • if compensation is calculated on the basis of a percentage of the salary, the
    competent court can always verify whether the final amount must
    be considered equitable.

In the light of the above short considerations, it is clear that the evaluation of the
validity of a non-competition agreement on the part of the competent labor court, in case of subsequent litigation, depends, especially in the case of an executive with high professional qualifications, on the specific circumstances of the case, so that
it is impossible to be sure that, should the former employee challenge the validity of the agreement, the agreement would be declared valid. Specific clauses to avoid or minimize such a risk can be included in the agreement.

It is also possible to provide an option right, whereby the employer can decide at the termination of the employment contract not to apply the agreement. This type of
clause should comply with the case law on this subject.

 

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