Non-competition agreement: requirements, critical issues and consequences

The article analyzes the non-competition agreement between employee and employer, highlighting the requirements under Article 2125 of the Italian Civil Code and possible critical issues. The fairness of the economic compensation is discussed and legal actions in case of breach of the agreement are explored.

What are the key features of the non-competition agreement between employee and employer?

The non-competition agreement must comply with the limits stipulated in Article 2125 of the Italian Civil Code, namely:

• Written form: the agreement must be in writing and may be included in the employment contract or in a separate document signed by the parties.
• Definition of the work activity subject to competition, time duration and geographical scope: the agreement must indicate precisely the activities and tasks that constitute competition, the duration of the constraint (not exceeding 5 years for managers and 3 years in other cases) and the geographical scope of operation.
• Financial consideration that benefits the employee: the agreement must provide for a consideration commensurate with the sacrifice required, determined on the basis of the salary received, the professionalism accrued, and the geographic and objective size of the prohibition.

All in all, the non-competition agreement must be in writing and include limits on subject matter, time and place, as well as a fair financial consideration for the worker. If these requirements are met, the agreement will be valid and productive in effect, otherwise it will be subject to possible challenge by the employee.

In what situations is the fee of the non-competition agreement deemed inappropriate?

The financial compensation provided in the non-competition agreement must be evaluated considering several factors, including the professionalism acquired by the former employee, the geographic and objective scope of the prohibition. To be congruous and appropriate to the sacrifice required of the former employee, the consideration must take into account the amount of salary received, the professionalism gained by the employee, and the geographic and objective scope of the prohibition.

The parties may freely determine the manner of payment of the consideration, which may be paid in installments, in a lump sum or monthly in a paycheck. However, the amount of consideration cannot be merely symbolic or unfair in relation to the obligation required of the worker, otherwise the non-competition agreement may falter.

In order to determine whether the financial compensation is fair and adequate, a case-by-case assessment must be made, taking into consideration the specifics of the work situation and the relevant industry, as well as the actual degree of competition that the former employee’s new work activity might represent for the former employer

What to do in case of violation of the non-competition agreement?

If the former employee violates the non-competition agreement, the employer may take legal action to obtain the restitution of the sums paid and compensation for the damages suffered. To do so, the company must prove the actual violation of the agreement by assessing the new work activity and the duties performed by the former employee.

If necessary, the employer can also initiate an emergency procedure by appealing to the court to order the employee to immediately cease competitive employment. The emergency appeal is used to obtain a quick decision in order to protect the company’s interests.

It is important to remember that the non-competition agreement must meet the requirements of Article 2125 of the Italian Civil Code, including written form, definition of the activity subject to competition, time duration, geographic scope, and financial compensation in favor of the employee. Without these requirements, the agreement could be considered void, making it impossible to take legal action against the former employee.