Violation of a Non-Compete Clause by an Employee or Former Employee

Violation of a Non-Compete Clause by an Employee or Former Employee can lead to serious disputes between employers and former staff. Understanding the legal remedies, enforcement challenges, and key considerations is essential for both sides. Employers often seek injunctions or damages to protect business interests, while employees may challenge the validity or scope of such clauses. This article explores how courts evaluate enforceability and what factors determine fair outcomes.

Who Can Breach a Non-Compete Clause?

Non-compete obligations vary by individual status and agreement type:

Employees – breach the clause if they engage in any competing activity during employment, such as running a similar business, working for a competitor under any legal basis, or freelancing in the employer’s market.
Former employees – can breach post-employment non-compete agreements, especially when they have access to sensitive information. Violations may occur even while receiving compensation for complying with the clause.
Management board members & liquidators – may not engage in or support competing businesses without the company’s consent. This includes holding significant shares or participating in management bodies of competitors.
Partners in partnerships – need consent from other partners before engaging in competing interests. This restriction applies during operations and liquidation periods.
Contractors – are bound by civil-law non-compete clauses if explicitly included in the contract. Breach consequences depend on what was agreed between the parties.

Violation During Employment

If an employee breaches a non-compete clause during employment, it may justify termination for cause. If the damage was unintentional, the employer’s financial claim is limited to the employee’s three-month salary. If the breach was intentional, the employer can seek full compensation.

Importantly, under the Polish Labour Code, penalties (e.g. contractual fines) cannot be imposed for breaches during employment. This is supported by Supreme Court judgments, which confirm that the Code’s liability rules are exhaustive in such cases.

Violation After Employment

A post-employment non-compete agreement protects a company’s business interests after an employee leaves. Such agreements are especially important when the employee had access to confidential business data. These contracts must define:

The duration of the non-compete (usually not exceeding two years).
The compensation payable to the former employee (often a percentage of prior salary).

If breached, the former employee may face:

Contractual penalties.
Repayment of previously paid compensation.
Full liability for any proven damage.
Additional civil-law claims for losses.

How to Prove a Breach

Employers must demonstrate:

Existence of a valid non-compete agreement.
Actual breach by the employee or ex-employee.
A causal link between the breach and the damage suffered.

Common forms of breach include:

Setting up a competing business.
Reaching out to former clients or suppliers.
Sharing or using trade secrets or pricing strategies.
Working covertly for a competitor.
Recruiting former colleagues.
Using company IP in a new job or business.
Such actions can harm the former employer’s finances, competitive advantage, and internal resources.

Consequences and Legal Framework

The key consequences of breaching a non-compete clause are:

Contractual fines, if agreed upon in post-employment clauses.
Compensation for damages if the employer proves loss, fault, and causal link.
In case of intentional misconduct, compensation can cover the full extent of losses.
Civil Code rules apply in post-employment cases, especially regarding contractual liability.
Polish courts emphasize that liability arises when the employee’s fault directly causes damage to the employer. This underscores the importance of both the agreement’s content and the evidence collected.

Conclusion

Non-compete clauses are not just protective measures—they are part of a broader strategy to build a culture of loyalty, protect intellectual property, and deter disloyal behavior. By linking compensation to prior earnings and enforcing violations, companies send a clear message that breach of trust will have consequences. This strengthens internal cohesion and the company’s market position in a competitive environment.