Non-competition agreement with an employee – Amendment of the Labour Code

An employee taking on additional employment

Under the terms of the employment relationship, an employee is obliged to fulfil a number of duties towards the employer. The fundamental duties are set out in Section 100 of the Labour Code, one of which is to look after the interests of the workplace, protect its property and keep confidential any information whose disclosure could expose the employer to harm. Over the years, on the basis of this provision, both court rulings and legal doctrine have established a specific principle of employee loyalty towards the employer. In this regard, an employee should refrain from any actions that could expose the employer to harm, including engaging in competitive activities if this could expose the employer to harm.

Of course, the Labour Code contains provisions regarding the possibility of concluding a non-competition agreement with an employee, in which the employer restricts the employee’s potential use of specific information; however, such agreements are not always concluded between the parties. Currently, the absence of such an agreement does not automatically mean that an employee is free to engage in activities that are competitive with the employer. In specific situations, on the basis of Article 100(2)(4) of the Labour Code, it is possible to assess whether an employee’s engagement in activities competitive to the employer constitutes a breach of the employer’s interests, is detrimental to the welfare of the workplace, or causes or may cause harm. In specific circumstances, engaging in competitive business activities – particularly by an employee possessing specialist knowledge constituting a trade secret – could constitute grounds for termination of the employment contract.

Non-competition agreements following the entry into force of the amendment

The planned amendments to the Labour Code are intended to implement Directive (EU) 2019/1152 of the European Parliament and of the Council of 20 June 2019 on transparent and predictable working conditions in the European Union (OJ EU L No 186 of 11 July 2019, p. 105), hereinafter referred to as ‘Directive 2019/1152’. The amendment provides for the introduction of Article 261(1) of the Labour Code, pursuant to which an employer shall not be able to prohibit an employee from simultaneously being in an employment relationship with another employer or from simultaneously being in a legal relationship forming the basis for the performance of work other than an employment relationship. Furthermore, the draft bill provides for a provision whereby simultaneous employment with another entity (on any basis) shall not constitute grounds for termination of an employment contract (unless otherwise provided for in separate regulations).

The obligation set out in Article 100 § 2(4) of the Labour Code will not disappear, and an employee will still not be permitted to use information constituting a trade secret; however, the consequences arising from this provision will no longer be subject to such broad interpretation. For the employer, this means that if an employee engages in competitive activity and, in doing so, uses the employer’s trade secrets, the employer will bear an even greater burden of proof in demonstrating that the employee has in fact disclosed the trade secret. Merely pointing to suspicions or the possibility of confidential data being used in the context of additional employment will not be sufficient.

Therefore, in any case where an employee possesses any sensitive data concerning the employer, the disclosure of which could lead to harm, this should be accompanied by the conclusion of a non-competition agreement. The new provisions do not, in fact, restrict the possibility of concluding such agreements.

A non-competition agreement may be concluded both for the duration of the employment relationship – which does not entail the payment of additional remuneration – and for the period following the termination of the employment relationship – in which case compensation must be paid in an amount not lower than 25% of the remuneration received by the employee prior to the termination of the employment relationship, for a period corresponding to the duration of the non-competition clause.

Summary

As of the date of publication of this article, the amendment to the Labour Code regarding the restriction on an employer’s right to prohibit an employee from holding concurrent employment is still at the stage of deliberation in the Committee on European Affairs. However, given that it implements a European directive, it is to be expected that the possibility for an employee to freely take up additional employment will be introduced. It is therefore worth considering now whether our employees’ additional employment could in any way harm our business operations. If such a risk exists, it is essential to enter into non-competition agreements that will impose restrictions on undertaking such activities. If we do not wish to incur additional costs after the employment relationship has ended, such an agreement may be concluded solely for the duration of the employment relationship.

At the same time, it is worth starting to conclude such agreements even before the amendment comes into force, as once the relevant provisions take effect, the employee will have no interest in imposing such a restriction on themselves.

Author

Agata Bączkowska

Adwokat, Senior Associate

She specializes in commercial and civil law. She has gained experience in Warsaw law firms providing comprehensive services to companies and a law firm specializing in labor law. She has extensive experience in corporate consulting. She has participated in mergers and acquisitions at every stage of the process, from pre-transaction legal examination to fulfillment of regulatory requirements related to the transformation process. She prepares and reviews contracts entered into by clients and advises in cases of…

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