Non-competition clauses in employment relationships: From theory to practice

Employers have a legitimate interest in protecting their company's know-how and customer base and therefore regularly include non-competition clauses in their employment contracts. However, whether and to what extent these are actually valid and enforceable is often disputed.

1. Prevention: Pay attention to the wording and formal requirements

The law requires that the non-compete clause be concluded in writing. This means that it must be contained in a written employment contract signed by hand or with a qualified electronic signature. If the signature is created using non-qualified signature services such as Dokusign or Skribble, or if a scanned signature is used, this requirement is not met, and the non-compete clause is completely invalid.

Furthermore, it is required that the non-compete clause not be excessive in terms of its material and territorial scope, as well as its duration. Courts have considerable discretion in this regard, and non-compete clauses are regularly reduced, restricted, or eliminated retrospectively. Depending on the situation, it may also be advantageous to agree on a non-solicitation clause or a customer protection clause in addition to, or even instead of, the non-compete clause.

To facilitate enforceability and thus provide effective protection in the future, it is worth taking a close look right from the start: an unambiguously formulated, realistic and situation-specific non-competition clause, which is linked to the necessary enforcement mechanisms.

2. Enforcement: React correctly and quickly in an emergency

But even if the formalities are met, this does not automatically guarantee enforceability. In particular, the law requires that the employee actually had access to sensitive customer data or trade secrets, and that their use could potentially harm the former employer.

This becomes particularly difficult in professions where the personal relationship between clients and employees is paramount. For example, clients of lawyers or architects or patients of doctors often change the service provider not because of the (generally competing) firm or practice, but because of the special relationship of trust towards the person providing treatment or consultation. In such cases, a non-compete clause is often unenforceable.

Enforcement is definitely made easier if a contractual penalty is stipulated in the contract from the outset. This can then be demanded directly from the breaching employee, if necessary through debt collection proceedings. Furthermore, one should consider the possibility of actual enforcement, so that a former employee can effectively be requested to immediately cease competing activities. In an emergency, action must be taken quickly and precisely so that an appropriate injunction can be ordered by the court without delay. If one waits too long, an injunction will usually not be implemented or will no longer be worthwhile in terms of time because the non-competition clause is about to expire.

3. Non-competition clause in the public sector: A different world

But what about public administration? As a public employer, the administration is bound by the fundamental rights guaranteed by the constitution, especially economic freedom. A post-contractual non-competition clause must therefore be based on a legal basis, be in the public interest, and be proportionate.

Non-competition clauses in public employment law fail in most cantons due to the lack of a legal basis. The following example from the Canton of Zurich demonstrates this: A doctor who transferred from the University Hospital of Zurich to a private hospital was to be restricted by such a prohibition. However, the Administrative Court clarified that without a legal basis, such an interference with economic freedom is not permissible and the non-compete clause was declared invalid (decision VB.2016.00044 of 29.06.2016).