Mon, Jul. 03, 2006

Non-Compete Clause Upheld

CK - Washington.   Under German law, non-competition clauses require ongoing payments for their validity beyond the term of employment. In a recent matter involving such a provision that lacked a specific mention of consideration, the Federal Supreme Court for Employment Matters, Bundesarbeitsgericht, docket number 10 AZR 407/05, upheld the clause because the carefully drafted language of the contract validly meshed with the statutory scheme. As a result, the statute supplied the compensation scheme.

The Recht und Alltag blog discusses an unusual factual aspect in that case: The employee had been terminated during her probationary period. On June 28, 2006, the Erfurt court held that the provision, Wettbewerbsverbot, had become effective and the employee was owed half of her salary for the term of the non-competition clause.

By contrast, the employer had argued that the provision had not come into force because the employee had failed to reach the end of the trial period and to become a fully-vested employee. The plaintiff had held up her end of the bargain and avoided competition with the defendant after her termination.

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