Since the time when the Supreme Court of the Czech Republic (in this article only the "Supreme Court") led the legal practice out of error when it interpreted that the provisions of § 310 paragraph 4 of Act no. 262/2006 Coll., Labor Code, as amended (hereinafter referred to as "ZP") does not enshrine the possibility of the employer to withdraw from the negotiated non-competition clause without further ado, but only limits the time until which moment he can do so (if the reasons for withdrawal are given by law - i.e. either a reason arising directly from the law or a reason negotiated by an agreement)[1], the professional public began to solve the problem of formulating agreed reasons for withdrawing from the non-competition clause.
According to Section 310, paragraph 4 of the ZP, the employer may withdraw from the non-competition clause only for the duration of the employment relationship. In a recent judgment issued on November 5, 11 under file no. stamp 21 Cdo 4779/2018 The Supreme Court summarizes the issue of the aspects of withdrawal from the non-competition clause that have been resolved so far and deals with the admissibility of one specific (and in practice quite often occurring, albeit in different wording variations, but with the same meaning) reason agreed between the employee and the employer.
The Supreme Court states in its established jurisprudence that § 310 paragraph 4 ZP does not entitle the employer to withdraw from the non-competition clause for any reason or no reason. The purpose of this provision is therefore only to define the time period in which withdrawal is permissible. In addition, according to the Supreme Court, stating the reason for withdrawal is an immanent part of every unilateral withdrawal from a legal act. Without giving a reason, withdrawal cannot produce the intended legal effects. In addition, the possibility for the employer to withdraw from the non-competition clause without giving a reason or for any reason would be an illegal favoring of the employer at the expense of the employee's rights[2] (in other words, in violation of the principle of employee protection established by law - § 1a, paragraph 1, letter a) of the Labor Code). The Supreme Court stated that even the conditions under which the non-competition clause can be waived are subject to the requirement that the non-competition clause be negotiated only if it is possible to fairly demand this from the employee (§ 310 para. 2 ZP)[3].
From the above, according to the Supreme Court, it follows that both the employee and the employer can withdraw from the non-competition clause only from reason specified in law or for the reason that parties to the employment relationship agreed in advance a which at the same time does not constitute an abuse of rights at the expense of the employee.
In the case under consideration (handled by the Supreme Court under file no. 21 Cdo 4779/2018), the employee and the employer agreed in the non-competition clause on the employer's right to withdraw from the non-competition clause if "at its own discretion, comes to the conclusion that, in view of the value of the information, knowledge, knowledge of working and technological procedures that the employee acquired in employment with the employer or otherwise, it would not be reasonable and/or expedient for the employer to enforce the agreed non-competition agreement against the employee or to insisted on him and paid him the agreed monetary settlement."[4]
The Supreme Court, after stating that the decision of the Court of Appeal had not yet been resolved in all contexts the question of whether the employer is entitled to withdraw from the non-competition clause on the basis of his "free discretion" about its expediency, referring to the agreed wording, he concluded that this arrangement not only contradicts the law, but at the same time clearly violates public order. TO its invalidity is thus considered even without a proposal (Section 588 of the Civil Code). For the aforementioned reason, the subsequent actions of the employer, when he withdrew from the non-competition clause with reference to this agreement, are also absolutely invalid.
With this conclusion (which was contradictory in comparison to the opinions of the finding courts in this proceeding), the Supreme Court effectively greatly limited the possibility of negotiating the de facto most rational reason for withdrawing from the non-competition clause. In this judgment, the Court of Appeal itself disputes the meaning and purpose of the non-competition clause. It confirms that its purpose is mainly to protect the employer against the leakage of information to a competing entrepreneur through employees who, in the course of their employment, become familiar with information having the nature of a trade secret or capable of obtaining a competitive advantage for a competing entrepreneur. The Supreme Court offers the following answer to the logical objection that every employer can think of, that in most cases when concluding an employment contract, the employer cannot know in advance whether an employee in a specific position will actually obtain such information that will be worthy of protection by a non-competition clause:
"It cannot be ruled out that after the conclusion of the non-competition clause, circumstances will arise in which the employee will not obtain such information (will not have it at the time of termination of the employment relationship), and the stated meaning and purpose of the non-competition clause will not be fulfilled. If the participants of the non-competition clause assume that such circumstances (consisting, for example, in the duration of the employment relationship) will occur (may occur) after the conclusion of the agreement, these circumstances can be negotiated in the agreement as a reason for withdrawing from the non-competition clause."[5]
From this quotation, it can be concluded that the Supreme Court does not a priori reject the possibility of negotiating reasons foreseeing the possibility that the meaning and purpose of the non-competition clause would not be fulfilled (for the employer) after the end of the employee's employment (and therefore the non-competition clause would be completely unnecessary for the employer). But it is obvious that the reason needs to be agreed upon objective basis (as the length of employment expressly stated in the judgment).
It is clear that it is not even excluded that it is agreed that the reason for resignation may be the fact that the employee did not (objectively) obtain information worthy of protection. However, this reason would be very difficult to prove in any court proceedings (obviously, an assessment by the employer and his assertion that this was the case would not be enough).
In the decision in question, the Supreme Court concludes that the agreement between the employee and the employer, which leaves it to the discretion of the employer, whether the employee obtained information worthy of protection in the course of employment is inadmissible. This is a similar situation as if, based on an agreement with the employee, the employer had the option to withdraw from the non-competition clause "without giving a reason" or "for any reason", and as a result, it is an invalid arrangement for violation of the law (§ 580 of the Labor Code).
In conclusion, it should be noted that in the context of this jurisprudence, it seems to be safer for practice (clients) to negotiate a non-compete clause only when the employer is sure that the employee has gained access to information worthy of protection through the non-compete clause (typically, the re-evaluation occurs only when termination of employment). However, this may of course result in the lack of interest of the employee, who may already have agreed to another job at that time (perhaps with a competitor), and thus will not be motivated to commit to the non-competition clause.
However, a non-competition clause concluded too soon as a preventive measure can become an unwelcome effect of the termination of the employment relationship, which the employer unilaterally does nothing about. In practice, of course, reasons for withdrawal are also negotiated, which are neither directly nor indirectly related to the amount of information obtained (e.g. the possibility of withdrawing from the non-competition clause due to or in connection with the termination of the employment relationship for a specific reason, etc.), but for these other reasons there is no Supreme Court jurisprudence yet available comparing these reasons with the criterion of the fairness of such a requirement for employees in the sense of § 310 paragraph 4 ZP. Of course, this at least raises doubts and does not allow certainty that the permissible agreed reasons for withdrawing from the non-competition clause will include, for example, the termination of the employment relationship for organizational reasons (that is, for reasons beyond the employee's control).
Source: epravo.cz
The team of the Vych & Partners, s.r.o. law office
[1] See, for example, the judgment of the Supreme Court issued under sp. stamp 21 Cdo 4986/2010:
"Both the employer and the employee may withdraw from the non-competition clause, for a reason stipulated by law or agreed upon by the participants. If the specified or agreed reason has been fulfilled, the employee can withdraw from the non-competition clause at any time. For withdrawing from the non-competition clause implemented by the employer, a time limit is prescribed in § 310 paragraph 4 of the Labor Code; withdrawal is effective only if it occurred during the duration of the employment relationship of the participants (before the termination of the employee's employment relationship with the employer)."
[2] See, for example, the judgment of the Supreme Court issued under sp. stamp 21 Cdo 4986/2010 or the judgment of the same court issued under sp. stamp 21 Cdo 18/2012).
[3] Compare the judgment of the Supreme Court issued under sp. stamp 21 Cdo 4394/2010.
[4] Quoted from the judgment of the Supreme Court issued under sp. stamp 21 Cdo 4779/2018.
[5] See ibid. as in note under line #4.
