A non-compete clause enables employers to forbid employees, after leaving their job, to compete with the employer’s company - either by running their own business, or by working for or owning part of another business competing with the present company.
Prohibiting the right to compete is a tricky area set between the conflicting priorities of business interests and the employee’s right to professional development. For this reason, great attention is given to the conditions regarding validity, impact, and infringement.
Statutory provisions concerning competition prohibition are laid down in the Swiss Code of Obligations (Art. 340 to 340c). However, the admissibility of the prohibition can only be judged on the basis of the individual circumstances of the employment contract parties. In order that a non-compete clause can even be enforced, the following conditions and more must be fulfilled (not a definitive list):
In order to offset the disadvantages incurred to employees by a non-compete clause, compensation payment is sometimes agreed. This payment from employers compensates the employee for the duration of the competition prohibition.
Violation by an employee of the non-compete clause results in liability to pay compensation. Due to the difficulty of proving any actual harm, a breach of contract penalty is usually agreed which must be paid even if no damage has actually occurred. If the damage caused amounts to more than the penalty, employers can demand added compensation. Any amount can be agreed for the breach of contract penalty but it generally covers several months’ salaries.
The prohibition ceases
If a non-compete clause needs to be agreed because the employee has insight into the customer base, one alternative is to agree a ban on customer poaching. While preventing the employee from stealing customers, it does not prevent the employee from continuing in their profession.
Bräunlich Keller, Irmtraud. (2011). Arbeitsrecht. Vom Vertrag bis zur Kündigung. Zürich: Beobachter-Buchverlag.
Ruedin, Philippe, Urs Christen & Irmtraud Bräunlich Keller. (2010). OR für den Alltag. Kommentierte Ausgabe aus der Beobachter-Beratungspraxis. Zürich: Beobachter.