Concluding non-competition agreements with employees after termination of employment is a relatively common activity, especially in the case of employees with extensive know-how and market knowledge. From the employer’s perspective, the employee’s knowledge of the trade secret is equally valuable.
However, the provisions of the labor law did not give an unambiguous answer to the question of how to protect the employer’s interest in terms of both competition and business secrets in relation to the former employee.
However, the Supreme Court commented on this issue, giving a specific answer on how the employer can protect his interest.
- Additional confidentiality clause
In the judgment number II PK 311/17 the court stated that the non-competition agreement after termination of the employment may contain an additional confidentiality clause. On the basis of this clause, the employer may require the former employee to pay a contractual penalty for breach of confidentiality rules, irrespective of the penalty resulting from the non-competition clause.
An obligatory element of the non-competition agreement is also to define the compensation payable to the employee for complying with the prohibition.
The court found that if the contract contains an element of non-competition clause and a confidentiality clause, the employer may pay one adequate compensation for both of these elements. It is important that this compensation is higher than the statutory minimum compensation amount, i.e. 25% of the salary received by the employee prior to termination of employment. Of course, this does not exclude the possibility of providing for separate amounts of compensation for each obligation.
- Defining competition and confidentiality
The Supreme Court also emphasized that the definition of the rules of non-competition, i.e. for example the indication of entities or the scope of activities that constitute competition, depends on the employer’s beliefs and it is the employer who defines them according to subjective criteria.
Defining the confidentiality is similar – it is the employer who determines what information in the possession of which the employee has come or may come into possession is important to them and whether use of the employee’s acquired knowledge by a competitor could expose the employer to harm. It is the employer’s balanced self-interest that is binding when formulating the content of the confidentiality order
- Contractual penalty paid by the employee
Similarly to the rules for the payment of compensation, contractual penalties for breach of the non-competition and confidentiality agreement are foreseen. According to the judgment of the Supreme Court, the employer may demand a contractual penalty from the former employee for breach of confidentiality rules, regardless of the penalty for breach of the non-competition clause.
In this way, employers and employees can regulate each other’s obligations after the termination of the employment relationship, however, it should be noted that the referred judgment in a way extends the actual possibilities of protecting the employer’s interest, as in practice during the employment relationship, it is the employer who is the stronger party to the contract.
Author: Aleksandra Hajdukiewicz, Associate in Kołecka Law Firm
