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Post-contractual non-compete clauses are a hot topic - and yet there are many misunderstandings about what really applies. How long can a non-compete clause be? Does it always have to be paid? And what is important for managing directors and employees?
Here are the five biggest misunderstandings - and what really counts:
Myth 1: Post-contractual non-compete clauses should be shorter rather than longer.
- This is not entirely correct. It is true that Post-contractual non-compete clauses may not be agreed for a period longer than 2 years.
- However, courts have also declared post-contractual non-compete clauses to be unenforceable due to their particularly short term of only 3 or 6 months.
- Reason: In the case of short terms, there are doubts as to whether the non-competition clause is covered by a legitimate interest of the company.
- However, depending on the length of the product cycles in the company, short non-compete clauses may also be enforceable. As is so often the case, it depends on the individual case.
Myth 2: Post-contractual non-compete clauses always cost money.
- This is not entirely correct either.
- For post-contractual non-competition clauses with employees, compensation of at least 50 % of the last contractual benefits received must always be paid if the non-competition clause is to be enforceable.
- The principle is different for managing directors and board members: In 2024, the Federal Court of Justice (BGH) once again clarified that the validity of a post-contractual non-compete clause with managing directors does not depend on the payment of compensation for non-competition. The decisive factor is that the non-competition clause is covered by a legitimate interest of the company and is not too broad in terms of content.
- However, managing directors may qualify as employees. In such cases, a post-contractual non-competition clause without compensation is null and void.
Myth 3: The more specifically the material and geographical scope of application is defined, the more likely the post-contractual non-compete clause is to be effective.
- In fact, specific designations are often not even possible at the time of the non-compete agreement because it is not possible to foresee who the relevant competitors will be when the employment relationship ends - often years later.
- In the case of post-contractual non-competition clauses with employees, a particularly specific limitation of the non-competition clause is also not required:
- This is because a post-contractual non-competition clause with employees that is worded too broadly is reduced by law to the part that is just permissible.
- It is safe to formulate the non-competition clause more generously here.
Myth 4: If a non-compete clause is worded too broadly, it is irredeemably void.
- A distinction must be made between post-contractual non-compete clauses with employees on the one hand and managing directors on the other.
- An excessively broad post-contractual non-competition clause with employees is reduced by law to the part that is just permissible and is therefore enforceable (reduction to preserve validity, see myth 3).
- The situation is different for non-competition clauses with board members: If these are too broadly defined in terms of geography or subject matter, they are generally irremediably void.
- In the case of non-competition clauses with managing directors, a reduction in the scope of application may be considered in exceptional cases if the agreement contains a severability clause that is not subject to GTC control because the managing director was able to influence the drafting of the clause.
Myth 5: Post-contractual non-compete clauses with employees are subject to stricter rules than non-compete clauses with managing directors.
- That is not true. Non-compete agreements with managing directors are sometimes subject to stricter rules.
- A non-competition clause for board members is generally incurably void if it is broader than necessary in terms of territory and subject matter (myth 4). In the case of employees, a post-contractual non-competition clause that is too broad is reduced to the extent that is just permissible and remains binding for both parties (myth 3).
- The situation is different for compensation for non-competition: Non-compete agreements with employees that do not provide for compensation for non-competition are null and void - this is not the case for managing directors (myth 2).
- In the case of managing directors, it is generally possible to waive the non-competition clause even after the end of the employment relationship. This is not the case for employees.
- It is therefore always necessary to check who is the addressee of the non-competition clause.