Last year, the professional public was relatively surprised by the judgment of the Supreme Court of the Czech Republic (hereinafter referred to as "SC") issued on 27 June 6, No. 2018 Cdo 21/1922-2018, which expressed itself in a completely new way on the issue of the bindingness of validly concluded non-compete clauses for employees. In this particular case, it was an assessment of whether the employee should be obliged to pay the contractual fine agreed for breach of the non-competition clause (either in full or in an amount moderated by the court) in a situation where, during the effective period of the non-competition clause, he joined a competitor and remained in an employment relationship with it for just 273 days.
The Supreme Court stated in the judgment:
"If, in the given case, the defendant's employment with the new employer lasted only a few days (from 12.11.2012/15.11.2012/2.1.2012 to 3/1/44, when it ended at the defendant's initiative by termination during the trial period), then this fact means that the defendant violated her contractual obligation ( liability) resulting from the non-compete clause only to a negligible extent. At the same time, it cannot be overlooked that the payment of the agreed contractual penalty terminates the employee's obligation by law and means that the employee is freed from the obligation to the former employer and the possibility to continue without interference (without further sanctions resulting from the non-compete clause) the performance of the gainful activity that was for him until at that time inadmissible from the point of view of the non-competition clause. In the given case, however, the pecuniary penalty for the defendant would be all the more significant (more tangible) if the payment of the contractual penalty would lack this liberating effect for her. In the opinion of the Court of Appeal, in this situation, it is not possible to fairly demand the payment of a contractual penalty from the defendant for the breach of the contractual obligation arising from the non-competition clause agreed between the participants on 2 January 513, and therefore the exercise of the plaintiff's right consisting in this demand must be assessed as contrary to good morals in the sense provisions of § 1991 paragraph 31.12.2013 of the Civil Code disciple. In case of possible misuse of sensitive information and knowledge, which are part of a trade secret, for the benefit of the new employer [anti-competitive behavior in the sense of the provisions of § 53 paragraph 757 letter h) Act No. 373/248 Coll., Commercial Code, as amended until XNUMX, hereinafter referred to as Commercial disciple. ], then the plaintiff had other methods of protection at her disposal [e.g. legal means of protection against unfair competition according to the provisions of § XNUMX et seq. business Act, including the possibility of applying for damages according to the provisions of § XNUMX and § XNUMX of the Commercial Code. Act., or in a serious case, the possibility of punishment according to the provisions of § XNUMX of the Criminal Code of the Act], rather than demanding a sanction in the form of a contractual penalty agreed in the non-competition clause."
If we summarize the opinion of NS, then the right to a contractual penalty was not granted because the employment relationship with the competing employer lasted only for a "negligible" period, and the payment of the contractual penalty in this way ex post (only after the expiry of the original duration of the non-competition clause) would not have exempted the employee effect (it would no longer be bound by the non-competition clause, as it would have expired long ago with the passage of time). Therefore, the requirement to pay a contractual penalty was found to be contrary to good morals. A number of experts in the field of labor law looked at this decision with a critical eye. From all of them we can choose, for example, the article by Adolf Mauwulrf published on www.epravo.cz on 16 October 10 under the title "How binding is the non-competition clause for employees?". In it, Adolf Maulwurf fairly clearly summarized the most problematic conclusions of the NS in the context of subsequent questions to which the employer public will be exposed in the future (quoted from the article: "So what else is a negligible period of time for breaching an obligation arising from a non-competition clause so that the employee does not have to pay a contractual penalty? It counts is this time in the order of days, or even weeks?")
Based on the employer's constitutional complaint, this decision of the NS was reviewed by the Constitutional Court of the Czech Republic.
The Constitutional Court of the Czech Republic (hereinafter referred to as the "Constitutional Court") upheld the constitutional complaint and annulled the judgment of the Supreme Court. He further stated that he had violated the applicant's property right and right to business guaranteed by Article 11 paragraph 1 and Article 26 paragraph 1 of the Charter of Fundamental Rights and Freedoms in conjunction with the principle of pacta sunt servanda arising from Article 1 paragraph 1 of the Czech Constitution of the Republic.
The Constitutional Court stated that the interpretation of Section 310 of the Labor Code regulating the non-competition clause carried out by the NS is contrary to the elementary principles of justice and emphasized that the non-competition clause must be seen entirely in the context of Article 26 of the Charter, which guarantees freedom of business.
The Constitutional Court stated, among other things:
"The constitutionally compliant interpretation of the provisions of § 310 of the Labor Code should therefore guarantee the entrepreneur (employer) the right to business to the greatest extent possible, which, however, can only be fully developed in an environment that consistently prevents the possible misuse of information acquired during the performance of employment and potential competitive conflict interests that could arise between a former employer and a former employee, or a third party for whom the former employee performs a gainful activity....”
"Given the contractual nature of competition clauses, it is necessary to interpret the subject provision of Section 310 of the Labor Code also in accordance with the constitutional principle of pacta sunt servanda (contracts must be respected)... The Supreme Court's interpretation made in the contested decision does not respect the binding nature of the non-competition clause." [1]
According to the Constitutional Court, the meaning and purpose of the non-competition clause lies in the preventive protection of the employer against the leakage of information to a competing entrepreneur through former employees. The Constitutional Court further stated in its argumentation that the conclusion of a violation of the non-competition clause as a contractually assumed obligation can be drawn from just "objectively given facts in the form of the performance of gainful activity" inferior in character to the definition of § 310 of the Labor Code. Duration of new employment or whether the employee will actually use the protected information for the benefit of the new employer or for the benefit of his own business, is not inherently decisive. The Constitutional Court justified its claim by saying that sensitive information and know-how can be transferred within a few hours or minutes (for example by copying the data to the hard drive).
In order to assess the intensity of the violation of the non-competition clause, the Constitutional Court stated that if the opinion expressed by the NS was accepted, the applicability of the institute of the non-competition clause for employers would be very questionable in practice. Negotiating a non-competition clause was completely pointless for the employer, as despite having negotiated it, they would have to be uncertain whether the degree of possible violation of the non-competition clause would not also be judged by the court to be negligible in the event of a dispute. This uncertainty is then unacceptable from a constitutional point of view with regard to the requirement to ensure legal certainty for participants in a legal relationship established by a non-competition clause.
The Constitutional Court also gave a clear opinion on the question of the possibility of the court to moderate the amount of the contractual fine for an alleged violation of good morals (the Supreme Court moderated the contractual fine to zero value). He referred to his earlier finding issued on 1 September 9 under file no. stamp II. ÚS 2015/2108, in which it is stated, among other things (we only quote part of the quote): "In the context of the matter, it means to find out what the parties were aiming for by implementing the contractual relationship, what was achieved as a result and whether such a result can be considered fair." The task of the court assessing the dispute within the binding legal relationship of two entities is, among other things, to find a state of equilibrium (optimal benefit for both parties). Through the optics of this conclusion, the Constitutional Court stated that the resulting situation created by the decision of the National Court was not fair (on the one hand, the employee violated the agreed obligation, on the other hand, the employer asserting the claim arising from the contractually agreed non-competition clause was unsuccessful and he was still required to pay a high amount of legal costs) .
At the same time, the agreed competition clause obviously provides the sought-after balance. It not only protects the employer's right to conduct business, but also provides protection for the employee's right to freely choose an occupation. If the former employee had behaved in accordance with the non-competition clause, she would be entitled to monetary compensation in the same amount as the amount of the agreed contractual penalty. The Constitutional Court therefore found nothing immoral about such an arrangement.
We will not hide that we were very pleased with this decision of the Constitutional Court, because there is nothing worse than offering clients a contractual arrangement that may or may not protect them, but will cost them something anyway. It goes without saying that no outcome of a court proceeding can be estimated XNUMX% in advance (various factual circumstances). However, both employers and employees deserve at least a certain degree of legal certainty regarding the interpretation of legal provisions.
Source: epravo
The team of the Vych & Partners, s.r.o. law office
[1] The finding of the Constitutional Court no. stamp II. ÚS 3101/18 of 2 May 5
