PhD in Juridical Science,
Associated Professor of the Department of Civil,
Commercial and Environmental Law,
Poltava Law Institute
Leading Researcher the Laboratory for the Study of
National Security Problems in the Field of Public Health
PhD in Juridical Science Junior
Researcher of the Laboratory for the Study of National Security
Problems in the Field of Public Health
Head of Legal and Compliance, ClarioTech Limited
Non-compete practice is a widespread phenomenon of nowadays’ employment relations. Taking start from USA/United Kingdom [1, p. 646-47] it is covering now more and more new countries, involving new and new professions and spheres. And whereas in some technologically-based and innovative areas such non-compete clauses are justified, in others – they seem nothing, but restriction (or even violation) of employee’s rights . It is obvious that employer wants to eliminate (or at least minimize) the competitive effect of his former employee, because: a) employee is a “carrier of confidential information”, b) employee is a “business instrument”, c) employee is an “investment object”, d) employee is a potential competitor. Especially non-compete practice is common for IT sphere, where companies want to protect their innovations, confidential information, and money, spent on employee’s growth and education.
But what about legality this practice in different countries?
The most experienced countries in terms of non-compete clauses implementation is USA where such practice in modern concept arises in the beginning of XX century, Germany and some others [3 p. 229]. Although there’s a variety of approaches among different states, all of them are based on the same main characteristics: 1) the scope: types of agreements and types of non-compete terms in the agreement; 2) the model of law-enforcement practice in terms of non-compete clauses implementation, their enforceability.
Analyzing the sense of non-compete clause in general we can assume that it includes seven main points: the subject; the form; the time; the territory; the scope and type of restrictions; “buy out” of the clause and the compensation. These characteristics are the core of non-compete clause, and, taking into account the principle of freedom in terms of agreement conclusion, it is up to law enforcement practice to determine minimal and maximal limits of such restrictions.
Subject. Subject who covered by non-compete clause must be identified – it is obvious and needs no clarifications. Much more interesting is that not every employee really needs to be bounded by such restrictions because of their minimal or absent impact on competition because of no connection with some sensitive commercial information of employer. But often such approach of limiting the subjects’ scope is not used by employers and they tend to cover with non-compete restrictions as much as possible. Such practice is highly discussed now in the US  and we have some positive restrictive examples in the EU countries (Germany and Belgium for instance) where the applicability of restriction is grounded on the rate of annual incomes of employee and some other restrictions .
Form. Non-compete clause by its restrictive nature must be clear, understandable and interpretable, so, it is obvious that such demands could be fulfilled only in the form of written mutual agreed provision, which can be a part of the existing agreement or a separate clause between the parties. But the terms of non-compete clause and agreement for their execution must be formally accepted by both parties. Such concept is general among the countries because of the fact that non-compete agreement (or clause) must meet general contractual requirements 
Time. Another term of non-compete clause is the period during which employee agrees not to compete with his employer as during the contract term, but such term can’t be unlimited. The practice of such term is pretty common and varies between one to three years after the contract termination. European practices are the same with US in this regard  and it usually determine the term of restriction during the employment and for a period of time afterward. Court might further limit the duration of a non-compete restriction as he thinks appropriate to different periods, for example – a period of time needed to hire and train a new employee; the time needed for vanishing of customers’ association between former employee and employer's business; period of time for confidential information to become obsolete etc.
Territory. The territorial scope could not be unlimited or not strictly defined, different countries use different approaches, it could be distance range (circle with the center – main office of the employer), it could be the administrative division (city, county, region etc.), it could be ZIP postal code area or else. Main point - it must be reasonable geographical area considering the size of the employer's market and the size of the area serviced by the employee.
Scope and type of restrictions. Types of prohibited or restricted activities must be clearly defined, be connected with employee functions. Such provisions could not be broad or not properly defined. Moreover, their definition must be connected with category of employer’s “legitimate business interest” in terms of how they impact each other.
“Buy out” clause. The employee must have the right to buy-out from restriction by paying to employer some contractually predefined fee. Such clause renews the “status quo” of both parties and legitimates further possible competition and also needs to be “reasonable”.
Compensation. Non-compete clause could not be just one-way obligation for the employee, such an agreement should be mutually favorable and not providing of compensation for employee for the restrictions bearing by him on the basis of non-compete agreement might be the reason of such contract (or clause) invalidity. Such practice is applicable in some US states, Germany, Belgium  and other countries.
Summarizing the above-mentioned, it is possible to say that beyond the differences between European and US approaches, there's a clear understanding of non-compete clauses' use unstoppable widening, especially in the IT-sphere when employers try to protect their confidential information and innovations in such way. But the enforceability of non-compete agreements and provisions in each separate contract depends on the wording and limits of stipulated restrictions. There are seven main points that employers have taken into consideration drafting non-compete agreements, particularly: the subject, the form; the time; the territory; the scope and type of restrictions; the "buy out" of the clause and the compensation. These characteristics are the core of the non-compete clause, and determining all of them increases employers' chances to enforce them in the courts.
- Harlan M. Blake, Employee Agreements Not to Compete, 73 HARV. L. REV. 625, (1960)
- Steven M. Harris / Physician Noncompete Clauses // The Hospitalist. 2012 July;2012(7). See at: https://www.the-hospitalist.org/hospitalist/article/125197/physician-noncompete-clauses
- Whalley, M.; Semler, F.-j. (eds). International Business Acquisitions: Major Legal Issues and Due Diligence. 3rd ed. The Hague London: Kluwer Law International, 2007, p. xi, 169, 268. 5 Ibid.
- Non-compete Contracts: Economic Effects and Policy Implications / Office of Economic Policy, U.S. Department of the Treasury. See at: https://www.treasury.gov/resource-center/economic-policy/Documents/
- German Commercial Code. See at : https://www.gesetze-im-internet.de/hgb/__74.html
- Shadowen, S. d.; Voytek, K. economic and critical analyses of the law of covenants not to compete. Georgetown Law Journal. 1983–1984, 72(4): 1425–1450.
- Norton Rose Fulbright / A comparison of laws in selected EU jurisdictions relating to post-contractual, non-competition agreements between employers and employees. See at: https://www.nortonrosefulbright.com/en/knowledge/publications/9807eea3/a-comparison-of-laws-in-selected-eu-jurisdictions-relating-to-post-contractual-non-competition-agreements-between-employers-and-employees
- Summary of Covenants Not To Compete: A Global Perspective Compliments of Fenwick & West LLP, a member of The TechLaw Group. See at: https://www.fenwick.com/FenwickDocuments/RS_Summary-of-Covenants.pdf