Jurisprudential commentary – post-contractual non-competition agreement.

As it is well known, the figure of the post- contractual non-competition clause is a strategic tool from a business perspective, as it temporarily prevents a qualified worker with experience acquired in the company from taking advantage of such knowledge in a competitor company. However, the use of
such a clause is not a simple matter, as on many occasions the validity of such clauses has been questioned and, consequently, the loss of effectiveness.

Therefore, this entry focuses on analyzing the issue following the latest ruling of the the analysis of the latest judgment of the Superior Court of Justice of Catalonia on this matter, dated May 26, 2023 (rec. 7941/2022). The non-competition clause in dispute is summarized in the following clauses inserted in the employment contract:

(i) In the third clause, on remuneration, it is stated that for the performance of his duties and his dedication as an employee of the company he will receive a gross annual fixed remuneration in 2018 of 120,000 euros, paid in 12 monthly payments of equal amount, including in such remuneration the
remuneration corresponding to his exclusive dedication in the company and to the post- contractual non competition clause.

(ii) In the fifth clause it was agreed, in addition to the working hours, an exclusive dedication agreement during the term of the employment relationship; and in the sixth clause it was agreed by the signatory parties a post-contractual non-competition clause, which I refer to and consider entirely

(iii) In said sixth clause it is established that the remuneration established in the third clause includes the economic compensation adequate to the obligations and commitments described, and understood by
both parties, equivalent to 30% of the Annual Gross Fixed Remuneration.

In summary, the employee and the company agree on a salary of 120,000 Euros per year, of which 30% comprises both the post- contractual non-competition agreement and the full dedication agreement. Having focused the debate, the High Court of Justice of Catalonia ended up ruling that the non- competition agreement is not valid, based on the following reasoning:

I. The agreement does not meet the requirements of clarity and transparency, since it is not possible to know exactly what is the amount with which the post-contractual non- competition agreement is
remunerated, given that the compensation of 30% of the fixed salary is used indistinctly to compensate the full dedication plan.

II. On the other hand, the economic compensation for the non- competition agreement has a compensatory nature and therefore cannot be included as part of the fixed salary and, in the words of the High Court of Justice of Catalonia, it is required in the payroll as a separate concept.

In conclusion, it is not enough to comply with the provisions of the rule -to have an effective industrial interest and to compensate adequately-, because the agreement must be made in transparent and clear terms with the maximum detail as to what amounts compensate what certain concepts, always designing the agreement to be aligned in spirit and appearance with the purpose of the rule: adequate compensation and compensatory nature.

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