Non-compete agreement during employment and post-contractual non-compete agreement in Spain are used by companies to prevent their employees from harnessing their expertise and training acquired in the company to provide other companies in the sector or those engaging in similar business activity with this knowledge, both during and after the employment relationship.
Business owners may wish to safeguard certain information regarding their business or may need to maintain the exclusivity of their employees’ expertise. To this end, there are different tools available to address such cases.
Non-compete agreement during employment in Spain
Firstly, we will take a look at the Non-Compete Agreement during employment in Spain, which is used to protect business activity when there is a possibility of an employee engaging in unfair competition during the term of the employment. It is not heavily regulated and must be set by mutual agreement between the parties in accordance with the minimum criteria provided for in article 21.3 of the Workers’ Statute.
This type of agreement is incorporated into the employment contract and in exchange, the employee must receive appropriate financial compensation for such commitment. This compensation must be clearly established and remunerated. If there is no compensation for the non-compete agreement, relevant case law has established that the agreement will be deemed null and void.
The employee may terminate the agreement whenever he or she wishes, on condition that written notice is provided to the company at least 30 days in advance. Upon termination of the agreement, the employee ceases to receive financial compensation and forfeits the rights associated with absolute commitment.
Post-contractual non-compete agreement in Spain
The post-contractual non-compete agreement in Spain, similar to the non-compete agreement during employment, lacks extensive regulation, thus must be set by mutual agreement between the parties in accordance with the minimum criteria provided for in article 21.2 of the Workers’ Statute.
The general requirements to ensure validity of the post-contractual non-compete agreement are the following:
- Effective industrial or commercial interest: the employer must demonstrate that the grounds for concluding the agreement are based on an industrial or commercial interest for the company.
- Duration of agreement: the agreement must not exceed 2 years for technical employees or 6 months for all other employees, following their contractual relationship.
- Adequate financial compensation: in practice, the amount that is usually agreed on varies between 60% and 75% of the gross annual salary of the employee. The interest protected by the company, the compensation and duration must be proportional and assessed on a case-by-case basis.
It is advisable to draft the post-contractual non-compete agreement in Spain in writing to obtain legal certainty despite the lack of requirements stipulated by law. This agreement may be signed prior to the contract (pre-contract), concurrently with the employment contract or upon its termination, since the post-contractual non-compete obligation does not derive from the law, but from the will of the parties.
In cases of non-compliance with the post-contractual non-compete agreement in Spain due to discontinuation of the payment agreed by the employer, the employee may claim the outstanding amount within a statute of limitation of one year or obtain a judicial decision to terminate the agreement.
If, on the contrary, the employee breaches the agreement, the employer may demand compliance with the agreement or cease payment, forcing the employee to return the compensation received to this end, and the business owner may sue for any damages caused.
In conclusion, both the non-compete agreement during employment and post-contractual non-compete agreement in Spain are beneficial for employees and employers provided that both parties comply with the established guidelines.