A non-compete clause is an agreement whereby the employee agrees not to engage, after the termination of the employment contract, in activities that are competitive with those performed for the employer, either for their own benefit or on behalf of a third party. This clause is intended to protect the company from potential risks arising from the transfer of knowledge and commercial relationships to competitors.

In return, the employer is obligated to pay the employee a monthly non-compete indemnity throughout the non-compete period. 

The non-compete indemnity is not considered salary but is negotiated and must be at least 50% of the average gross salary earnings of the employee from the last six months prior to the termination of the employment contract. If the duration of the contract was less than six months, the indemnity is calculated based on the average monthly gross salary earned during the entire duration of the contract.

The non-compete indemnity is an expense borne by the employer, deductible in calculating taxable profit, and subject to taxation at the individual beneficiary level, according to legal provisions. In practice, a non-compete clause that does not specify the amount of the indemnity in a concrete manner is considered null and void.

This clause can be negotiated at the conclusion of the individual employment contract or during its execution and must not contradict the provisions of collective labor agreements. Furthermore, to be valid, the non-compete clause must be brought to the employee’s attention at the time of signing the contract.

The non-compete clause is only valid if the individual employment contract clearly specifies the activities prohibited to the employee upon termination, the amount of the monthly non-compete indemnity, the duration of the clause, the third parties for whom the employee is prohibited from performing activities, and the geographical area where the employee could enter into direct competition with the employer.

The non-compete clause can be effective for a period of up to 2 years from the date of termination of the individual employment contract. If the employee intentionally violates the non-compete clause, they may be required to repay the indemnity received and, if applicable, pay damages for the harm caused to the employer.

The non-compete clause cannot absolutely prohibit the practice of the employee’s profession or specialization. At the request of the employee or the territorial labor inspectorate, the competent court may reduce the effects of the non-compete clause.

Employers must approach the application of non-compete clauses in employment contracts with care, as these clauses are not necessary or relevant for all employees. Non-compete clauses are intended to protect sensitive information and commercial relationships of the employer. 

However, applying non-compete clause to all employees, regardless of their roles and responsibilities, can be ineffective. For example, non-compete clauses are generally relevant for employees with access to strategic information or who hold key positions. Imposing them on employees who do not have a direct impact on the company’s competitiveness may be excessive.

While this clause can provide valuable protection for employers and prevent unfair competition, it must be formulated in a manner that is reasonable and equitable, in accordance with applicable law.

In conclusion, although the non-compete clause can be an effective tool for protecting businesses, its implementation and application must be carried out with caution and legal compliance to avoid legal conflicts and to maintain a balance between protecting commercial interests and individual rights.

Author: Atty. Felicia Cioflan