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Non competion clauses in Italy /English)

The Italian Civil Code regulates the non-competition obligation of the employee towards his employer both during the work relationship and after its termination. 

During the performance of the work contract the employee is bound by a duty of loyalty. S/he may neither carry on business, even on behalf of third parties, in competition with the employer, nor can s/he disclose any information concerning the organisation, production methods and know-how of the employer company which may damage its activity.

The employee’s duty of loyalty is provided by law (Section 2105 of the Civil Code) and is deemed to be included in the work relationship as an additional obligation. Therefore, it is automatically in force and no special provision for it is required in the employment contract.

Breach of this obligation entitles the employer to dismiss the employee for subjective, justified reasons or even for just cause, depending on the seriousness of the alleged infringement. Disciplinary measures for the employee are also provided.

Non-competition rules are only effective during the work relationship, and cease to have effect after termination of the work relationship, unless the parties have signed a non-competition agreement agreeing to extend the ex-employee’s duty of loyalty.

More precisely: after the termination of the work relationship, the employee can freely perform his work activity by using his acquired experience in the same field and in the same geographical area as the employer. The obligation not to compete after termination may be agreed by the parties as the object of a clause originally included in the work contract, or as a specific undertaking subsequently arranged at any time during the work relationship.

The non-competition discipline provided by the Section 2125 applies to all employees, with executive duties or non intellectual functions, the only relevant issue being the potential risk of damage suffered by the employer. In drafting such an agreement, a balance must be struck between, on the one hand, the interests of the employer are not to be damaged by the future activity of the ex-employee and, on the other hand, the interests of the employee himself who should be placed in a position to express his freedom of occupation and to continue his work activity by making use of the acquired experience.

Since a post-employment non-competition covenant equates to a restriction of the right to work, private economic enterprise and competition (rights protected by the Italian Constitution at Sections 4, 35 and 41), strict requirements for its validity are provided for by the Civil Code. The covenant must be:

– in written form;
– with proper consideration;
limited in object, geographical area and durationThe maximum duration is 5 years for managers and 3 years for all other workers and if a longer term is agreed by the parties, it is automatically reduced to the maximum duration prescribed by law.

As far as consideration is concerned, it must meet a proportionality test, for it should include proper economic compensation which is in proportion to the reduction of the employee’s earning capacity. The law does not specify anything further in respect of what factors are to be taken into account when assessing the consideration.
The Labour Courts have established that the consideration:
– can be paid either during the work relationship (as a fixed sum or a percentage linked to the salary), at the end of it, or after its termination;
– cannot be automatically considered as a part of the salary, as it is instead a distinct element related to an obligation which is different and subsequent to the work obligation. Consequently it is relevant with reference to the obligations to contribute and provide a severance payment only if paid monthly and in addition to the normal salary.

 As a contractual obligation, a non-competition agreement can be cancelled by mutual consent of the parties, unless the unilateral withdrawal of the employer is originally agreed (in which case this right can be exercised only before the termination of the work relationship).

 Section 2125 only provides for non-competition clauses agreed with employees. Different rules apply in respect of self-employed workers and commercial agents (Sections 2596 and 1751 of the Civil Code), providing for specific maximum terms of validity (5 years and 2 years respectively).

 In the event that the clause is breached, the burden of proof rests on the (former) employer.

 Judicial remedies available to the former employer (in the form of preliminary injunctions issued by Labour Courts) against the employee in breach of the covenant not to compete are:-

  • order to stop the work activity performed in breach of the clause;
  • order for reimbursement of the consideration paid;
  • order for the payment of a penalty (if any);
  • order for compensation of damages.
The former employer cannot sue the new employer that has employed a worker who is in breach of a non-competition clause before the Labour Courts, but can instead claim unfair competition before the Civil Courts.