How to protect your know-how
Losing a good employee is always a major blow to a company—especially when that employee takes all their expertise with them to a competitor. Under certain conditions, employers can protect themselves against this. By Irmtraud Bräunlich Keller, lic.rer.pol., editor and labor law expert at the Beobachter Advisory Center.
With a contractual non-competition clause, employers can oblige employees to refrain from any competitive activity after leaving the company, i.e. "neither to operate a business on their own account that competes with that of the employer, nor to be active in such a business or to participate in it" (Art. 340 CO).
However, as a non-competition clause severely restricts an employee's professional opportunities, it is only valid under certain conditions. If these are not met, the non-competition clause can be contested:
- A non-competition clause must be agreed in writing between the employer and employee - through a specific personal agreement, be it in the employment contract or a separate agreement. A passage in the personnel regulations is not sufficient.
- Non-competition clauses can only be validly agreed if the employee had insight into the clientele or facts to be kept secret. Information that is only accessible to a limited group of people and is important for economic competition in the market served by the employer is considered secret. Information that is easily accessible or even known to industry insiders does not constitute a secret. Insight into the customer base refers to the employer's regular customer base, i.e. regular customers whose particular wishes and needs are not known to everyone.
- The use and dissemination of this special knowledge must be capable of causing significant harm to the employer. It is irrelevant whether the employer actually suffers damage; the risk of disadvantage is sufficient.
- A non-competition clause must be reasonably limited in terms of place, time and subject matter. As a rule, it may apply for a maximum of three years and must be limited to the region in which the employer operates. In terms of content, it must relate to the activities that the employee actually carries out. The non-competition clause must not unreasonably impede the economic advancement of the employee subject to it.
Anyone who breaches a non-compete clause is liable for damages. As it is not always easy to prove and quantify the actual damage, a contractual penalty is usually agreed to simplify matters and act as a deterrent - a fixed amount that the obligated person must automatically pay if they do not comply with the contract, even if no damage has yet occurred.
The non-competition clause ceases to apply if the employer terminates the employment relationship without the employee having given him reasonable cause to do so. (e.g. termination for economic or organizational reasons).
The non-competition clause also lapses if the employee resigns for a reason for which the employer is responsible (e.g. breach of contractual obligations).
However, as a non-competition clause severely restricts an employee's professional opportunities, it is only valid under certain conditions. If these are not met, the non-competition clause can be contested:
- A non-competition clause must be agreed in writing between the employer and employee - through a specific personal agreement, be it in the employment contract or a separate agreement. A passage in the personnel regulations is not sufficient.
- Non-competition clauses can only be validly agreed if the employee had insight into the clientele or facts to be kept secret. Information that is only accessible to a limited group of people and is important for economic competition in the market served by the employer is considered secret. Information that is easily accessible or even known to industry insiders does not constitute a secret. Insight into the customer base refers to the employer's regular customer base, i.e. regular customers whose particular wishes and needs are not known to everyone.
- The use and dissemination of this special knowledge must be capable of causing significant harm to the employer. It is irrelevant whether the employer actually suffers damage; the risk of disadvantage is sufficient.
- A non-competition clause must be reasonably limited in terms of place, time and subject matter. As a rule, it may apply for a maximum of three years and must be limited to the region in which the employer operates. In terms of content, it must relate to the activities that the employee actually carries out. The non-competition clause must not unreasonably impede the economic advancement of the employee subject to it.
Anyone who breaches a non-compete clause is liable for damages. As it is not always easy to prove and quantify the actual damage, a contractual penalty is usually agreed to simplify matters and act as a deterrent - a fixed amount that the obligated person must automatically pay if they do not comply with the contract, even if no damage has yet occurred.
The non-competition clause ceases to apply if the employer terminates the employment relationship without the employee having given him reasonable cause to do so. (e.g. termination for economic or organizational reasons).
The non-competition clause also lapses if the employee resigns for a reason for which the employer is responsible (e.g. breach of contractual obligations).
Book tip
Labor law
From contract to termination
The Beobachter guide provides information on all aspects of employment contract law, including the non-competition clause. Is it valid? What should I do if the prohibition is breached? The long-standing Beobachter employment law specialist answers all questions competently and in detail. The handbook also contains many sample templates, concrete examples and tips as well as groundbreaking court rulings.
10th, extended
and updated
Edition 2009,
Observer-
Book publisher,
ISBN
978-3-85569-412-9
272 pages,
paperback, Fr. 36.-
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The Beobachter's new service: competent legal advice for SMEs and their employees. 6 months for only Fr. 99.- (introductory price).
You can reach the legal experts Monday to Friday from 9 a.m. to 1 p.m. on 043 444 54 09. You also have full access to the advice platform Helponline.ch and an Beobachter magazine every 14 days. The price also includes a gift: the standard work for SMEs from Beobachter-Buchverlag,
"How to get your money", worth CHF 48.
Order the consulting subscription for SMEs at: www.werbewoche.ch or by phone: 0800 83 0800.
