Non-Compete Legal in Switzerland

Non-Compete Legal in Switzerland

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The violation by an employee of the non-competition clause entails the obligation to pay compensation. Due to the difficulty of proving actual harm, an infringement penalty is usually agreed, which must be paid even if no actual damage has occurred. If the damage caused exceeds the penalty, the employer may demand additional compensation. Any amount can be agreed for breach of contract, but usually covers several months` salary. In order to ensure compliance with these laws, employers in Switzerland are required to take into account the working hours of employees. This requires the introduction of a system of time recording and working time arrangements defining the obligations and general principles governing working time and the recording of working time and absences. The existence of the recording system and the regulation of working time is usually part of legal due diligence. Where employees are transferred in the context of an asset operation, merger or division, the employees` representatives or, in the absence of employee representation, the employees of all the undertakings concerned must be informed of the reason for the transfer and of the legal, economic and social consequences of the transfer for the employees. An employee who violates the non-compete obligation is required to compensate the employer for the harm caused by such competing activity. The onus is on the employer to prove that such damage actually occurred. In practice, it is often difficult, if not impossible, to determine the financial harm suffered by the employer and a causal limit (adequate causality) between the competing activity and the possible harm. If a non-compete clause has to be agreed because the employee has a customer insight, an alternative is to agree on a ban on customer poaching.

While it prevents the employee from stealing customers, it does not prevent the employee from continuing his or her profession. The analysis of an existing non-competition clause includes an examination of the employment contract clause and the applicable provisions, the employment relationship and the reason for termination (CHF 200 – CHF 600). An hourly rate applies to negotiations. Do not hesitate to contact us via Tel. 043 535 00 85 / villiger(at) or Internet. Under Swiss social security law, the legal classification of a natural person or a company controlled by a natural person as an external service provider or employee depends on the circumstances of the individual case and not on the name of the contractual relationship. If the employer terminates the employment contract, a non-competition clause in the employment contract expires. An exception applies – and the non-compete obligation remains in place – if the dismissal is based on a valid reason attributable to the employee. If the employee terminates the employment contract, the non-competition clause remains in force, unless its termination is for an important reason attributable to the employer. We analyse, edit, negotiate, prosecute and defend non-competition clauses (non-solicitation clauses) in employment contracts in Switzerland.

More information on the non-competition clause and other aspects of labour law can be found in the observer`s brochure „Labour law. From contract to termination”, which you can borrow from our library. In addition, legal diligence should consider whether the employees of the target company fall within the scope of a collective agreement, which may contain conditions that apply in addition to the terms of the employment contract, usually for the benefit of employees. Unlike most European legal systems, however, termination in Switzerland is possible informally, unless otherwise agreed. Thus, in these cases, a termination can also be effective verbally, via email or via Whatsapp. For evidentiary reasons, however, it is always advisable to file a complaint in writing or to call witnesses. The maximum duration of a non-compete obligation after termination is three years. A judge may restrict an excessive non-compete obligation, taking due account, where appropriate, of the employer`s contribution. A non-compete obligation expires when the employer no longer has a significant interest in maintaining the prohibition. Courts tend to limit agreed prohibitions on subject matter (goods, services), place (market) and time, particularly when formulated as „catch-all” clauses. Therefore, it is very important to design a non-compete clause in such a way as to protect the legitimate business interests of the employer, while allowing the employee to pursue a career in the market.

As a general rule, a non-compete obligation should apply only to the main products or services for which the employee was responsible and only to the main geographic markets in which those products and services were sold. In addition, a non-compete obligation should only last as long as the employer has to re-establish a customer relationship with a successor to the outgoing employee. Swiss law does not provide for monthly set-off for non-competition clauses/restrictive agreements/non-solicitation clauses. However, they can be agreed in the employment contract. Provisions on severance pay contained in employment contracts (e.g. golden parachutes) may make it more costly to dismiss employees and thus affect the legal right of the target company to terminate employment contracts in a timely manner. M&A agreements often contain assurances that the target company`s employment contracts do not contain such provisions. According to some legal commentators, the Zurich court`s decision may have been justified in this case, but it nevertheless raises problems in that it gives the impression that a non-compete obligation would not apply to asset managers in all circumstances. If the non-competition clause expires due to termination by the employer, it is possible to agree on a new non-competition clause (e.g. in a termination agreement).

At this stage, however, the employee generally assumes such an obligation only if he is compensated for it. The non-competition clause is governed by the Swiss Code of Obligations. Read the current legal texts here. Non-solicitation follows the same rules as non-competition clauses. If the legal requirements are met, a non-solicitation clause may even apply to clients and clients who were previous clients or clients of the employee at the time of joining the employer, because from a legal point of view, they become clients and clients of the employer. However, it is very difficult to distinguish between customers and customers when it comes to why customers and customers do business with companies or organizations. If a client or client deals with an employer solely on the basis of very specific knowledge or skills of an individual employee (e.g. lawyers, doctors), a non-solicitation clause may be null and void. If clients follow an employee because personal aspects characterize their business relationship, a non-solicitation clause is not valid or applicable to those clients. Bonus provisions are usually part of HR due diligence to determine whether the target company`s staff budget complies with its contractual legal obligations. Although no compensation must be paid for the non-compete obligation to be effective, the payment of such consideration also increases the likelihood that a far-reaching non-compete obligation will be upheld by a court, since such compensation mitigates the financial impact of the non-compete obligation on the worker.

Swiss law sets strict conditions for the effectiveness of contractual non-compete obligations entered into in the context of an employment relationship, based on the principle that employees must be allowed to change employers and continue to earn a living without a non-compete obligation unduly affecting their future economic activity.