Mistake to be avoided in a non-competition agreement

Dr Eszter Vezse, Dr Zoltán Csernus // origo.hu // 7 February 2017

When concluding a non-competition agreement an employer must be very careful, otherwise a lot of money could be lost. In addition, the employee can use the experience and acknowledge on another employer and it may strengthen the employer’s competitors.

The basic wage and the compensation of the non-competition agreement must be separated in the agreement. The Hungarian Supreme Court has declared in its decision that the compensation of the non-competition agreement is not part of the base wage. Therefore, if the base wage includes the compensation, the non-competition agreement will be void and the employee may start working for the competitor right after the termination of employment.

In order to avoid further disputes, the employer and the employee must comply with some basic rules. The minimum non-competition period and the minimum compensation is prescribed by law. Besides that, the geographic and professional area covered by the agreement must be reasonable and it can not unduly restrict the employee. Contractual penalties can also be stipulated, but the amount should be defined really carefully.

The provisions of the non-competition agreement should be defined carefully in order to protect the economic interests of the employer and to properly regulate the further employment of the worker.Read the whole article in Hungarian