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Withdrawal from non-compete clauses without a reason is possible

  • Czech Republic
  • Employment law

30-06-2021

A recent decision by the Constitutional Court on the withdrawal of employers from non-compete clauses has caused considerable uproar.

Facts of the case

In the case in question, the employer and the CEO had a non-compete clause in the employment contract it which it was agreed that the employer is entitled to withdraw from the non-compete clause in writing at any time during the employment relationship, even without providing a reason.

Some time later, the CEO decided to terminate his employment and gave notice to the employer. At the end of the notice period, five days before the termination of the employment, the employer delivered a written notice of withdrawal from

the non-compete clause to the employee, without stating a reason for it. The employee challenged the employer's action with reference to the constant case law of the Supreme Court, according to which the employer's withdrawal from the non-compete clause without providing a reason is absolutely invalid, as it constitutes an abuse of rights by the employer. The case went all the way to the Constitutional Court.

The Constitutional Court responds

The Constitutional Court did not support the constant case law of the Supreme Court.

It pointed out that the non-compete clause serves mainly to protect the employer. On the contrary, it is in the employee's interest not to be bound by a non-compete clause that significantly restricts his ability to find gainful employment, limits him in applying his knowledge and skills and thereby reduces his price on the labour market, and puts him at risk of the obligation to pay a contractual penalty.

The Constitutional Court stated that the absolute invalidity of a withdrawal from

a non-compete clause can only be assessed based on detailed evidence in each specific case.

Under what conditions can the clause be waived?

The Constitutional Court allowed the employer to withdraw from the non-compete clause even without giving a reason just before the termination of the employee's employment if the employer sufficiently explains why it could not have done so earlier. This may be the case, for example, where the employer discovers just before the termination of the employment that the employee has disclosed know-how protected by the non-compete clause during the employment

and the non-compete clause therefore has no further significance.

However, situations where the withdrawal from the non-compete clause occurred on the last day of the employment relationship without the employer having a justified reason, or where the employee found a job in a different sector with the express purpose of complying with the non-compete clause, and the employer learned of this and withdrew from the non-compete clause to avoid its obligation to pay the employee for complying with it, will continue to be indefensible.

The decision of the Constitutional Court strengthens the position of employers and restores practical applicability to the non-compete clause.