The post-contractual non-compete agreement is a clause that, although initially atypical and unknown, becomes essential for certain jobs, in order to preserve, among others, the know-how, training, experience, etc. that a worker has gained while providing his or her services to a company.
First, this agreement is regulated under Art. 21 of the Spanish Workers’ Statute, and, in order to incorporate it into contractual relationship, the parties, especially the company, must take into account some requirements to avoid a court from declaring the agreement void.
Requirements of the post-contractual non-compete agreement:
- Duration: must not exceed two (2) years for degreed-workers (technical or highly qualified employees) and six (6) months for other employees;
- Commercial or industrial interest: an employer must have an effective commercial or industrial interest that justifies the conclusion of the agreement. This interest is inferred if damage is caused to the company by the performance of an activity that the company intended to be prohibited;
- Adequate financial compensation for the worker: it intends to compensate the deprivation of work opportunities that such an obligation implies for the worker, and, at the same time, providing the worker with economic stability after the end of the employment relationship.
The Workers’ Statute does not determine the amount or form of the compensation, which means that, in principle, it can be anything that the parties agree to in the contract. Notwithstanding the latter, the jurisprudence has contemplated several formulas, such as following:
- Payment of a fixed amount during the months of the employment relationship. The risk involved in this formula is that to be valid the seniority of the worker must be generated during the validity of the employment relationship and the amount received for that concept.
- Payment of a certain amount once the employment relationship is terminated either pro rata for the duration of the prohibition, whether at the beginning or at the end; or at the end of each natural semester of the non-compete prohibition period.
This kind of agreement might be concluded at any moment during the validity of the employment relationship, without the possibility of unilateral withdrawal by either the worker or the employer. In the event that compliance with this clause is left to the discretion of only one of the parties, the agreement will be considered null.
Finally, in case an employer fails to comply with his or her obligations, the worker must obtain a judicial decision that frees the worker from his or her obligations. This does not prevent the worker from also claiming the payment of the agreed amount.
If the worker fails to comply, the employer must prove the breach and must refer to the employee performing any of the expressly prohibited activities agreed upon in the contract itself. Nothing prevents the “establishment of a penalty clause” consisting of the repayment of what was paid including the payment of compensation for damages caused. If a penalty clause is not established, the usual consequence is the imposition by a court to reimburse the amounts paid by the employer in proportion to the unfulfilled time.
The post-contractual non-compete agreement is legally effective in Spain, it should not be underestimated by employer nor employee.
This article is not considered as legal advice