The non-compete after termination of the employment relationship is regulated by Article 1012 of the Labour Code. This regulation states that in the case when both the employer and the employee have access during the employment relationship to particularly important information, the disclosure of which could expose the employer to damage – in such a case the parties conclude a non-competition agreement after the termination of the employment relationship. Such agreement should include the area in which the employee will not be able to perform competitive activities, the period of validity of the non-compete and the amount of compensation due to the employee from the employer, as well as a possible contractual penalty for the former employee against the former employer. The case law does not discuss whether it has to be concluded in the form of a separate agreement if the non-compete was also in force during employment. Therefore, it has been assumed that it is possible to combine two such agreements in one document, with the proviso that they must contain the necessary elements for each of them.

In the case of a non-compete during the employment relationship, the employer uses such a form of protection in order to secure itself in the event that a trained employee would be recruited by a competitor with a similar type of business activity. Most importantly, such an agreement protects the employer, both during and after the termination of employment, against a potential leak of information belonging to the company secret, as understood under Article 11 of the Act on Combating Unfair Competition. When it comes to the aspect of information that could expose the employer to damage, due to undefined definition of such information, the judgement as to whether it is actually particularly important for the employer depends on both the employer and the employee.

The point of dispute, however, is the time during which it is permissible to conclude such an agreement. In the doctrine, one side considered that it is not without reason that the Legislator used the expression that this clause is concluded between the employer and the employee, because it is the employment relationship that is the basic element of its conclusion. The other opinion is that since the Legislator did not include the prohibition on concluding such an agreement after the termination of the employment relationship, there are no contraindications to its conclusion, having regard to the fact that it cannot be excluded that there will be a situation in which only after the termination of employment a need arises to conclude such an agreement. From a formal point of view, such an agreement may be concluded at the same time as the employment contract, which is also concluded by the employee and the employer, creating a legal relationship in which they perform this role. From a practical point of view, the employer should, in his best interest, conclude this contract at least before both parties are interested in concluding such a contract. An employee who is leaving a job, or a former employee, may not be interested in entering into a non-compete agreement. It is also a good idea to write such a non-compete agreement well, i.e. to define its scope as widely as possible and to relate it both to the scope of the employee’s duties and to the employee’s own business.

If the agreement does not include the amount of compensation for the former employee, the compensation referred to in Article 1012 § 1 of the Labour Code may not be lower than 25% of the remuneration received by the employee before the termination of the employment relationship for the period of time corresponding to the duration of the non-compete agreement. As a result, if the duration of the non-competition agreement concluded with the employee is set for 2 years, the compensation cannot be lower than 25% of the remuneration received by the employee during the 2 years of his employment with the company. In the situation when the employee was employed for a shorter period of time, the number of months of the non-competition agreement should be multiplied by his average monthly remuneration. Such compensation can be paid once or monthly, depending on the agreed terms. If such a term is not set by the parties, it is usually paid monthly on days coinciding with the term of the monthly remuneration paid by the employer. However, this compensation is taxable and is excluded from social security contributions.

From an employee’s perspective, it may seem that by signing such a clause he deprives himself of potential employment. This issue was addressed by the Supreme Court, which in its verdict dated 4 November 2010, ref. II PK 108/10, held that:

“The prohibition of competition after termination of the employment relationship does not mean, in general, a prohibition to perform the same type of professional activity as with the former employer, related to the learned profession, but only a prohibition to use it in the process of producing such goods and services that constitute the object of that employer’s activity or similar (substitute) goods and services.”

Therefore, if a person who has worked all his life in one profession, may after signing such a competition clause, continue to work in that profession for another employer, but may not use the tools and procedures that were used to create material or immaterial value with the former employer? This thesis seems absurd, because, on the one hand, the above judgment puts forward contradictory theses (learned profession vs. lack of action on the subject of the former employer), and on the other hand, it would not allow to shape the scope of the prohibition, which is commonly applied.

As we can see, such prohibition must be waived in order to undertake competitive work, but are we sure? In the case when the employer does not or no longer pays remuneration due to the non-compete obligation after termination of the employment relationship, or when the reasons justifying such prohibition expire, the competition prohibition is no longer in force. The Court of Appeals in its verdict dated 27 March 2015, III APa 52/14, gave its voice to this issue, admitting that “The obligation imposed on the employer to pay compensation should be explained in such a way that if the employer’s obligation is composed of obligations to pay individual agreed instalments on specific dates, the failure to observe even one of them is a reason for the termination of the competition prohibition”.

But what if it was the former employee who broke the non-compete agreement? Due to the fact that when ending the employment relationship we can no longer refer to the regulations of the Labour code, in this case the civil code and regulations concerning obligations becomes the key. The discussed agreement, signed after the termination of the employment relationship, is a specific obligation, and failure to comply with it is regulated accordingly by articles 471 et seq. of the Civil Code.

In order for the employer to protect himself in case of breaking a non-compete by a former employee, a good solution is to include in the contract a contractual penalty that binds the parties regardless of the amount of damage. In this case, we see a cross between the Civil Code and the Labour Code. Despite the fact that when speaking about the contractual penalty we refer to the civil law regulations, the amount of the penalty, when added to a non-competition agreement after the termination of the employment relationship, should be corrected by the rules of the labour law. Such a penalty replaces damages, and therefore removes the obligation to prove the damage and its amount, which falls on the employer and in practice is difficult to prove. Despite the fact that the top-down amount of the penalty is set in the agreement, when the former employee decides that the amount of the penalty in relation to the damage suffered by the employer is grossly excessive according to Article 484 § 2 of the Civil Code, he may demand that it be reduced, but then the duty to prove it rests also on him.

In the case when the agreed contractual penalty is lower than the actual damage inflicted by the employee towards the former employer, the Supreme Court in its verdict dated October 10, 2003, file no. I PK 528/02r, stated that “it is possible to include in the agreement a clause that the employer will have the right to claim also compensation exceeding the contractual penalty” – such clause in the agreement will definitely protect the employer in this type of situations.

The penalty clause in a non-competition agreement after termination of the employment relationship is quite controversial, however, as we can see in the doctrine, it has been accepted that in such a case the former employer deserves more protection than the employee who has broken such an agreement.

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