While employers will remain able to use competition bans for most workers, the law requires a new approach to the development, implementation and enforcement of these agreements. This contribution summarizes the new law, identifies the measures taken by employers and raises several questions that will arise from this reform. Other types of restrictions are not considered „non-compete agreements“ and are explicitly excluded from the scope of the law. Non-competition clauses must also include a „garden leave clause“ or any other form of mutually agreed consideration. This type of clause requires the employer to pay the worker at least 50% of his highest salary in the last two years during the duration of the non-competition clause. 18th Annual Business Litigation Conference, MCLE, 2019. Section 3, „Non-competition agreements and related restrictive arrangements“. Applicability to other restrictive agreements: the recently adopted law is limited to prohibitions of competition, so it does not affect other restrictive agreements that employers often invite to sign. Therefore, an employer may continue to impose confidentiality agreements, no-pouming clauses and related conditions, provided that they otherwise comply with applicable law. Calculation of the amount of the „garden holiday clause“: in order to satisfy the requirement of the garden leave clause, it is necessary to set the rate of pay for the period covered by the non-competition agreement. The law imposes a rate of at least half of the wage in relation to the highest wage paid to the worker in the two years preceding the dismissal of the employee. However, employers and workers may agree on another amount that will replace the legal formula for garden leave. To be valid, the amount must be mutually agreed and explicitly stated in the non-competition clause.
If the non-competition clause does indeed contain a „garden holiday regime“: yes. But if not, no. And according to NuVasive, the agreement doesn`t need to have a „garden holiday“ provision to be enforceable. In practice, if this case is correct, I would expect that few, if any, employers would actually pay for „garden holidays“ in their competition bans. . . .