How to sign non-competition agreements with employees?

A non-compete agreement is a tool that is actively used in countries with a developed legal system. It is used to protect their business from former employees and partners who have important information about the company, but for some reason moved to work in other firms or started their own business. Disclosure by former employees of confidential information about a former employer or business partner can cause serious damage to the business. It is for this reason that a non-compete legal protection mechanism has been developed. It provides for the signing of a special agreement, according to which the employee or business partner, after the termination of employment, is prohibited from working with certain clients or in a certain area for a specified period.

If the employee who signed the contract violates these obligations, a fine will be imposed on him. When an agreement is entered into with a business partner, the sanction for disclosure of information may be forfeiture of assets and forfeiture of a stake in the business.

In fact, non-compete agreement protects information that cannot be protected by copyright and patent law. We are talking about the peculiarities of the organization of business processes, professional competencies of employees.

Is it possible to conclude an agreement on non-competition in the Russian Federation?

Under Russian law, it is impossible to directly prohibit a person from working in a certain position or starting his own business after the termination of labor relations with the previous employer. These requirements violate the norms of labor legislation and article 37 of the Constitution of the Russian Federation. According to article 9 of the Civil Code of the Russian Federation, the refusal of a person from the right to engage in certain activities during the specified period is invalid. If a person violates their obligations, then it is impossible to bring him to justice due to the invalidity of the transaction.

On the other hand, in judicial practice there are cases which non-compete agreements were recognized as legally binding documents. This means that, subject to certain conditions, such agreements can be concluded. The experts call the main conditions the reasonableness of the restrictions and the retribution of the agreement.

When signing an agreement with a business partner, the practice of negotiating competition with an option is effective. This means that upon the occurrence of certain conditions, the person who signed the contract will receive some opportunities or will be deprived of them. For example, it can be the opportunity to buy out a share in a business at a discount if a former partner violates their obligations. If the signatory does not have his share, but wants to get it, he will lose this opportunity for violating the non-compete agreement.

How should an employer and an employee behave in the event of a non-competition agreement?

When concluding a non-competition agreement, the following principles must be observed:

  1. Availability of remuneration for an employee for signing an agreement. This can be monetary compensation, a promotion, the provision of long paid leave (the so-called "garden leave").
  2. The limitation period should be reasonable. Its duration depends on the scope of the company. In some cases, one year is sufficient, and sometimes the ban period lasts several years.
  3. The non-compete agreement has territorial boundaries. They operate within a specific city or region.
  4. A non-compete agreement can be entered into with the former business owner from whom you buy a company or other assets.

We would like to draw your attention to the fact that there is no universal approach to signing a non-compete agreement. It is impossible to draw up a standard contract that will suit all employees without exception and will be effective for any business. There are always nuances, and it is important to identify them when developing the terms of the agreement. The most important thing when signing an agreement is the reasonableness of restrictions, which allows you to protect the interests of both parties to the transaction.

Procedure for concluding a non-competition agreement in foreign jurisdictions

The ability to sign and comply with non-compete terms is largely jurisdictional. In some Western countries, non-competition agreements can only be signed with certain categories of employees. For example, some states in the United States prohibit non-competition conditions for low-paid employees. Among the nearest neighbors, the most interesting is the experience of the Republic of Belarus. Here, the law provides for mandatory compensation for compliance with the terms of non-competition. The term of the agreement should not exceed one year, and the restrictions apply only to certain types of activities and territory. If the employment relationship with the employee was terminated, the former employer, after signing a non-compete, is obliged to pay the employee a monthly allowance. Its size cannot be less than 1/3 of the average monthly salary of an employee for the last year.

The signing of a non-compete agreement is a relatively new practice for our country. You can discuss the nuances of such agreements and develop a working protection mechanism with the lawyers of A4 Law Firm.


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