Employees frequently move to competing companies for a variety of reasons. In this context, it is often said that non-competition clauses are inadmissible or “not enforceable anyway”. However, this assertion does not apply in this absolute form. The possibility to agree on a post-contractual non-competition clause is even provided for by law (Art. 340 et seq. SCO).
Validity and effectiveness of a non-competition clause
In order to conclude a valid agreement on a non-competition clause, it only needs to be in writing. However, the non-competition clause is only effective if the employment relationship gives the employee insight into the clientele or into business secrets and if the use of this knowledge could significantly harm the employer (Art. 340 para. 2 SCO). A merely minor possibility of harm thus precludes the effectiveness of the non-competition clause.
Cancelation of the post-contractual non-competition clause
The post-contractual non-competition clause is cancelled if the employer gives notice to the employee without the employee having given the employer cause to do so or if the employee gives notice because the employer gave him reasonable cause to do so (Art. 340c para. 2 SCO). Reasonable cause within the meaning of Art. 340c para. 2 SCO is any event attributable to the other party that may give substantial cause for termination. The existence of an actual breach of contract is not necessary. The obstacle of just cause is less significant than that of good cause within the meaning of Art. 337 SCO.
Limitation according to place, time and subject matter
According to Art. 340a para. 1 SCO, a non-competition clause must be limited in terms of place, time and subject matter. However, if a non-competition clause proves to be excessive, the non-competition clause is not simply disregarded. Rather, the judge may limit the non-competition clause at his discretion, which often also leads to a reduction of the agreed contractual penalty.
The principle is that the local limitation of the non-competition clause should refer to the geographical area in which the employer’s clientele is located, although exceptions are possible. The more specialised a business is, the greater the local extension of the non-competition clause may be. In terms of subject matter, “any competitive activity” may be prohibited. In terms of time, the non-competition clause may not last longer than three years, whereby the maximum duration may only be exceeded under special circumstances (cf. Art. 340a para. 1 SCO). However, this does not mean that shorter prohibitions or prohibitions of three years should always be qualified as reasonable. The decisive factor for the appropriate duration of the prohibition is, among other things, the type of knowledge to be protected. Manufacturing and trade secrets frequently justify a longer duration than the mere insight into a customer base. Accordingly, the Federal Supreme Court reduced the non-competition clause of a sales representative with insight into the clientele from three years to six months.
Hardly enforceable real execution
Real execution is not about the payment of a contractual penalty in the case of a breach of a non-competition clause — by far the most frequent case — but about the judicial prohibition of working for the competitor. For this, a number of prerequisites must be fulfilled. Real execution must be explicitly mentioned in the actual non-competition clause. Furthermore, it is required that the interests of the employer are unreasonably violated or endangered and that the employee has behaved in an extraordinarily disloyal manner. Since the negative consequences for the employee if the application for real enforcement is approved can be very serious, real execution is only granted in rare cases.
Sufficient grounds for the cancellation of the non-competition clause are, for example, permanent overload and excessive assignments due to a lack of staff for which the employer is responsible, a tense working atmosphere and unilateral changes in the allocation of territories and customers by the employer, late payment of wages, continuation of short-time work beyond the approved period, etc. It is advisable to document and complain about such grievances, because they can be used in the event of a dispute to prove that the non-competition clause no longer applies. However, if such reasons exist, it is not advisable to wait too long before terminating the employment contract, because otherwise there is no temporal connection between the cause and the termination.