The non-competition agreement
Under Italian Law, the employee is limited when carrying out, on his own or on behalf of third parties, activities in competition with the entrepreneur. However, in order to further limit these activities, also after the termination of the employment, it is necessary to enter into a non-competition agreement.
According to Article 2125 of the Italian Civil Code, the non-competition agreement is a contract by which:
- the entrepreneur shall pay a sum of money to the worker;
- the worker shall not carry out, directly or indirectly, any activities in competition with the one of the companies he used to work for;
- the worker shall compensate the entrepreneur if the agreement is breached.
In order for the agreement to be valid, certain requirements must also be met. In particular, the agreement shall be:
- limited to a certain commercial activity, expressly indicated in the agreement;
- limited to a geographical area, specifically defined;
- in written form;
- valid for no more than 5 years.
The non-competition agreement may apply to all employees and professionals working of the company and shall always mediate between the interests of the parties. In fact, agreements providing for disproportionate payments are null and void. On the other hand, in the event of violation of the agreement, the other party may also take legal action to request the interruption of the competitive activity and possible compensation for damages.
In Italy, the non-compete clause is generally common in distribution agreements, but it is prohibited in agency agreements.