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Prohibition of non-competition and non-competition clause in the employment contract

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Prohibition of non-competition and non-competition clause in the employment contract

Prohibición de no concurrencia y cláusula de no competencia en el contrato laboral
Prohibition of non-competition and non-competition clause in the employment contract

When signing employment contracts, in some sectors more than in others due to the business activity carried out, we see the need to agree bilaterally on clauses in which the worker’s duty not to attend the employer during the term of the employment relationship is established, as well as the commitment on the part of the worker not to compete with the company during a certain period of time , when said contract concludes.

At this point it is important to know what these commitments imply for the signatory parties reciprocally.

Unfair competition prohibited

As a paragraph, it is necessary to understand that although the non-competition and non-competition agreements are the subject of an agreement between the parties, unfair competition/competition is expressly prohibited by the Statute of workers in its article 21:

The labor benefit of a worker may not be carried out for various employers when unfair competition is deemed or when full dedication is agreed through express economic compensation, in the terms that the effect are agreed.

In short, it is expressly prohibited to carry out work corresponding to the same sector of industrial or commercial activity that is identified as effectively concurrent strong>, such as manufacturing similar products, attracting clients or co-workers, and the company must have an effective and real commercial and industrial interest not to attend, without it being necessary, however, that there is certain damage for the company and it is enough that it is potential, without it being necessary that there is a direct benefit for the worker. This attitude would constitute a violation of the contractual good faith that must govern any employment relationship and would be cause for disciplinary dismissal.

Non-compete agreement

Regardless of the foregoing, companies and workers may agree during the term of the employment relationship a non-competition agreement, which would imply that they cannot provide service simultaneously for another company in the same (or other sector), even if there is no commercial or industrial interest, even if it does not attract customers for the second one or even if it does not imply any potential damage. A clear example is the one that provides services in two textile companies, one dedicated to the sale of men’s clothing and the other to the sale of children’s clothing. It could never be estimated that unfair competition exists despite the fact that they converge in the same commercial sector. However, if the concurrence agreement could be formalized:

Full-time covenant

You could even agree on the exclusive dedication of the worker to his employer, which would guarantee that he does not provide services for any other company. It is one by virtue of which a worker agrees to provide his services exclusively to a single employer through financial compensation, to the detriment of his right to multiple jobs. Said agreement is extinguished by the will of the worker, thus losing and extinguishing the financial compensation; by the will of the employer in the form and with the effects of a modification of the working conditions; or with the simple termination of the employment relationship.

Non-Compete Agreement

Post-contractual agreement in which the worker undertakes not to carry out any activity, directly or indirectly, on his own account or on behalf of others, to a company in the sector, establishing the following requirements to avoid invalidating the non-competition agreement:

  • That the employer has accredited having an effective industrial or commercial interest that justifies the conclusion of the agreement, under penalty of nullity, interest that is extracted if damage is derived from the company by carrying out the activity that is intended to be prohibited.
  • The employer must pay the worker adequate financial compensation (sufficient and proportional), which will be specified upon signing the non-competition agreement and paid either during the term of the employment relationship, or at the extinction of the contract (Plus of non-competition). Said amount is not salary in nature, but compensatory, since it does not remunerate a provision of services. The indeterminacy of it supposes the infeasibility of the pact (TS 10-7-91).
  • The agreement cannot last more than two years for technicians and six months for other workers. In general, it enters into force immediately after the termination of the employment contract.

Consequences of non-compliance

  • By the employer.- The worker may claim the amounts committed by the employer, as well as compensation for the damages that non-payment (and effective non-competition) could cause. We cannot ignore the fact that signing a non-competition agreement has a strong impact on the normal development of the relationship that the worker maintains with the company, diminishing, for example, the initiative that the former may have to change jobs or accept job offers from competitors that improve their current conditions; or even to be more condescending when exercising labor rights, such as terminating the contract or causing voluntary leave, evidencing that it can be up to two years without serving in the same sector.
  • For the worker.- What is stipulated in the agreement will be followed, and it is possible to agree to the return of the amounts already delivered by the employer (not twice as much as it would be disproportionate according to jurisprudence), or an amount of compensation stipulated by mutual agreement. If the return of the amounts paid as a “non-competition plus” is not expressly agreed, only the agreed amount of compensation can be claimed, as the Supreme Court has been ruling.

Similarly, they may claim for damages suffered by the employer.

The term to claim the worker will be one year from when the employer confirmed the breach of the agreement and, in any case, one year from the expiration of the agreed term for non-competition.


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