Non-compete clause in employment law: when is it enforceable?
In Switzerland, non-competition clauses are subject to the provisions of the Swiss Code of Obligations (CO). It is only enforceable if it meets certain legal criteria. The legal requirements for a non-competition clause are set out in the CO, which establishes the framework conditions for safeguarding the employee’s freedom of occupation and preventing abuse.
Legal requirements for the enforceability of a non-competition clause
For a non-competition clause to be enforceable in Switzerland, the following requirements must be met:
- Written agreement: a non-compete clause must be set out in writing in the employment contract. Verbal agreements are not legally binding.
- Geographical and temporal limitation: A non-competition clause must not be too far-reaching. It must be reasonable in terms of both time and geography. Terms of 1 to 2 years are common and the prohibition must be limited to a specific geographical area.
- Activity limitation: The prohibition must relate to the specific area in which the employee worked. A blanket non-compete clause in all professional fields is not permitted.
A non-competition clause is therefore only effective if it is in line with the principles of labor law and respects the employee’s freedom of occupation.
Legal consequences of violating a non-competition clause
If an employee violates an enforceable non-competition clause, the employer can take legal action. These may include the following consequences:
- Contractual penalty: in some cases, the employment contract provides for a contractual penalty in the event of a breach of the non-compete clause.
- Injunction: Under certain circumstances, the employer can demand that the employee cease the competing activity if this is provided for in the employment contract
- Claims for damages: The employer can demand compensation for the damage caused by the breach.
The court can adjust the non-compete clause or the contractual penalty provided for if:
- The prohibition is not appropriate (e.g. too long or too far-reaching).
- There is no legitimate interest of the employer to be protected by the prohibition, for example if the business secrets or customer relationships are not worthy of protection or, depending on the case, in the event of termination by the employer.
What should employers and employees bear in mind?
Employers should ensure that a non-competition clause is only included in the employment contract if there is an actual need for protection. It must always be kept reasonable and within a clearly defined framework in order to ensure its enforceability. Employees should be aware that a non-competition clause can significantly restrict their professional opportunities after the employment relationship has ended.
Although the legal requirements for a non-compete clause are clearly regulated in theory, in practice they often leave room for discussion. It is therefore advisable to have the employment contract reviewed by a specialist in the event of a non-competition clause
Our lawyers will be happy to answer any questions you may have in the area of employment law.