One of the most important duties for the employee that has recently regained importance due to the introduction of new technologies (code, blockchain, computer programs or software, etc) is the prohibition of concurrence with the activity of the company.
Written by Josep Conesa
Labor and bankruptcy lawyer
Along with this generic duty, the law contemplates another assumption: the permanence agreement that, even without a direct relationship with the prohibition of competition, is connected with it by pursuing, ultimately, retaining qualified employees in the company moreover if the company has paid studies.
NON-COMPETENCE DURING THE TERM OF THE CONTRACT:
As a general principle is that an employee can work for different companies. What is unfair competition is to work at the same field: for the same activity.
The jurisprudence understands that unfair competition occurs in cases in which the activity of the employee is aimed at intentionally carrying out work tasks of the same nature or branch of production, for another employer or on their own, without the consent of their employer and that causes actual or potential harm to the employer.
NON-COMPETITION AFTER THE TERMINATION OF THE EMPLOYMENT CONTRACT OR RELATIONSHIP IN SPAIN:
Anyone can work wherever he wishes after the contract.
The obligation of non-competition after the employment relationship only arises in Spain through an agreement. It can be agreed as an individual agreement between the parties, either at the conclusion of the employment contract, during its term, or at the time of its termination, and even (although with greater limits) after that termination.
The employer must have and prove an effective industrial or commercial interest that justifies the conclusion of the agreement, under penalty of a possible nullity of the non-competition agreement. Furthermore, the requirement that the employee abstains from competition must be technically or commercially justified, for which it is necessary that said employee is in possession of knowledge about the company's organizational or production techniques, personal relationships with customers or suppliers, etc. that may constitute unfair competition and effectively detrimental to it.
ECONOMIC COMPENSATION FOR NON-POST-CONTRACTUAL COMPETITION AGREEMENT
The employer must pay the employee an economic compensation that must be determined and on its quantification determines the status that must be adequate, being the parties the ones that must set it. But the jurisprudence in Spain has settled that a minimum compensation must be more than a 10% or a 15% of his annual remuneration.
DURATION OF THE NON COMPTETENCE CLAUSE:
The non-competition agreement will not last more than two years for technicians and six months for other employees and begins into force immediately after the termination of the employment relationship, even if the termination of the contract was because of unfair dismissal from the Company with who the employee agreed.
CLAIM AGAINST THE EMPLOYEE FOR NON-COMPLIANCE OR NON FULFILMENT OF THE CLAUSE:
The employee agrees, through the agreement, to an obligation not to do, to refrain from carrying out competitive activities with his former employer. The breach of the employee will refer, then, to the performance of the activities prohibited by the post-contractual non-competition agreement.
When it is the employee himself who competes with his former employer, the judge may order the closure of the corresponding establishment. However, it is notably difficult to try to get the employee to immediately refrain from the activity initiated and prohibited by the agreement, and it is necessary to revert to compensation for damages.
Failure to comply with the agreed obligations by the employee entails the duty to compensate damages, as long as the reality and amount of the damage is proven, as well as its causal relationship with the employee's conduct.
AMOUNT OF DAMAGE COMPENSATION FOR NON-COMPETENCE CLAIM IN SPAIN:
The problem lies in how to set or determine that compensation:
- It can be expressly determined in the agreement: normally the return to the company of what was paid as financial compensation; on other occasions, the amount will be indeterminate, it can be set by virtue of judicial discretion and weighing, this, the elements of justice within its reach.
It is not necessary that the amount of the economic compensation agreed for the non-competition and the compensation agreed for the event of non-compliance coincide, in such a way that it is possible to be higher and includes an excess for damages.
- It can be set after the non-competition agreement: Article 1255 of the Spanish Civil Code thus allows the amount of compensation to be set by virtue of the general principle of freedom of contract, before or after the breach of the employee has been verified. If the employee partially breaches the obligation, the amount of compensation must also be reduced proportionally.
Incorporation of penal clauses: It is even possible to incorporate penal clauses that would fulfill a coercive or guarantee function, encouraging the employee to fulfill the obligation assumed not to carry out competitive activities. This penal clause would evaluate in advance the damages that could be caused and would exonerate from proving the existence and amount of the damages that have occurred.
IN CASE OF BREACH BY THE ENTREPRENEUR:
The post-contractual non-competition agreement is only valid when the requirements determined by law are faithfully fulfilled: maximum duration of the non-competition agreement, the existence of an effective industrial and commercial interest, and adequate economic compensation to the employee for the deprivation of opportunities of the employee who such an obligation entails.
The jurisprudence of the Supreme Court at the time nuanced the right of the employer to freely breach the agreement, arguing that it was a bilateral, reciprocal obligation, which means that compliance cannot be left to the discretion of one of the parties (Article 1256 Civil Code ). It is therefore necessary for the employer to grant a period of notice to mitigate the damages that could be caused to the employee. Otherwise, the employer should pay compensation.
In no case can the employer unilaterally annul this non-competition agreement. Therefore the company has the obligation to pay the amount. Only in the event of an agreement between the employee and the employer, if any of the agreed deadlines are not met, the effects of the non-competition agreement will be terminated, recovering full freedom of work. If there is no agreement, the employee can go to the Social Court to order the employer to pay the agreed amounts.
THE AGREEMENT OF NON-COMPETITION AND PERMANENCE FOR THE CEO:
For CEOs, the prohibition of working with other companies and the possibility of establishing a full-time agreement, provided for in the Employees' Statute for employees subject to common regulations, are included for senior management personnel in the non-competition agreement contained in Royal Decree 1382/85 that regulates the special relationship of Senior Management or CEO
It always requires two requirements:
1.- That the employer has an effective commercial or industrial interest in it.
2.- That the employee is paid adequate compensation in consideration.
By adequate compensation, we must understand that which is agreed upon by the employer and the employee as fair compensation for the fact of restricting the freedom of the employee to provide their services to any company, whether or not it has the same economic activity as the previous employer. However, the judge can assess whether or not it is really adequate to restrict such freedom.
The permanence agreement assumes that the employer is entitled to compensation for damages if the CEO has received a professional specialization charged to the company, and leaves it before the established term.
This means that unless authorized by the employer, or written agreement to the contrary, the employee cannot enter into contracts before the established term.
When the prohibition of competition is prolonged once the special relationship has expired, we are dealing with a non-competition agreement, which cannot exceed a period of more than two years.