This article deals with the law of the Slovak Republic and its application by Slovak courts and authorities.
A non-compete clause is an agreement in which one party commits that, after the cooperation ends, it will not carry out activities competing with the other party for a certain period. In practice you most often encounter it in employment contracts, but also in agreements between business partners or when selling a business. The problem arises when the clause is drafted too broadly or unfairly – in such a case it may not be enforceable at all.
For a non-compete clause to hold up, it must above all be reasonable. This means it should clearly define the scope of activity it covers, the territory to which it applies, and especially a time limit. A clause that would effectively prevent a person from earning a living in their profession anywhere and forever is generally invalid. Courts assess whether the restriction protects a legitimate interest while not unnecessarily harming the other party.
In an employment relationship, an adequate counter-value also plays an important role in a non-compete clause. If an employee is asked to refrain from competing activity for a certain period after the employment ends, they are usually entitled to financial compensation for it. A clause without such compensation tends to be significantly weaker and its enforcement is questionable.
The penalty for a breach, i.e. the contractual penalty, deserves special attention. Even if agreed, it does not necessarily mean it is enforceable in full. If the penalty is disproportionately high given the circumstances, the court may reduce it. Therefore, the mere existence of a threatened penalty in a contract does not mean the other party will automatically succeed in a dispute.
Before signing any contract with a non-compete clause, we recommend reading carefully what exactly it prohibits and for how long. It is equally important to know what you receive in return and what consequences a breach entails. A small ambiguity in wording may in the future decide whether the clause is valid or not.
If you are considering signing a contract with a non-compete clause or are dealing with a dispute over its enforcement, we are happy to help. At kohút & partners we will assess your clause for an agreed fixed price and answer your question within 24 hours. Do not hesitate to contact us and gain certainty before you sign.