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Top 5 facts about post contractual non-compete clauses in German employment law

Employees joining the services of a competitor after having terminated their contract are a fear for many companies. The loss of knowledge ,contacts and ultimately business often is real. Thus it is understandable that employers want to protect themselves. German employment law however contains a number of pitfalls employers should avoid when agreeing a post contractual non compete.

1. Don’t forget to sign the agreement

The post contractual non-compete must be executed in writing, signed by
both parties and handed over to the employee. Verbal agreements or electronic
communication is not sufficient and renders the clause non-binding. This is
especially important in case of offer-letters and (extensions of) limited term

2. Be careful about reservations

The reservation to later conclude a restrictive covenant at the choice
of the employer (especially in an offer letter) is invalid, but it is possible
to agree on an initial (probation) period, during which the non-compete is not in

3. Be realistic when assessing your market position

A non-compete is only enforceable, if and as far as it is protecting
legitimate business interests of the employer. The clause must take into
account both the market position of the employer (region of activity, actual
competitors, products/services) and the actual scope of work of the
individual employee (area of responsibility). Thus non-compete clauses must be
individualized, otherwise employers might have to pay compensation while the
former employee works with a competitor.

4. Don’t forget the compensation

A non-compete clause without compensation payment is null and void. But
even a wrong calculation of the compensation in the clause might lead to a non-binding
agreement. This means, that the employee has the choice to either refrain from
competition and claim the (full) compensation or to walk away to work with a
competitor immediately.

5. A waiver by the employer must be done timely

A waiver of a valid non-compete can regularly be declared (in writing)
at any time, but only during the lifetime of the employment agreement (until
the end of the notice period). The waiver is immediately valid for the
employee, who remains – however – entitled to the compensation for the duration
for one year. Therefore careful anticipatory planning is needed.