Milan Court of Appeals: non-competition agreement and option clause in favour of the employer

The Court of Appeals of Milan, with sentence 908 of 2 September 2019, addressed the issue of the validity of the non-competition agreement subject to the right of option under Article 1331 of the Italian Civil Code for the employer.

Facts of the case

The case in question originates from the appeal filed by an employee who, after resigning, had asked the Court of Monza to ascertain and declare the nullity and / or ineffectiveness and / or invalidity of the clause relating to the right of option attached to the non-competition agreement asking, at the same time, the employer company to be ordered to pay the compensation anticipated for that agreement.

The employee’s request was based on the assumption that the pact, although operating for the period following the end of the employment relationship, would be finalized with the relative agreement, thus preventing him from planning his employment future and consequently constricting his freedom.

In rejecting the action brought by the employee, the Court stated that it was obvious in this case that the company had not exercised its right of option and, therefore, that no non-competition agreement had been concluded between the parties. Consequently, in the view of the Court, no right to the consideration provided for in the non-competition agreement could be invoked by the employee. This is because “this right has never arisen (Ed. had never arisen), since no agreement on the point has been reached because of the lack of exercise of the right of option by the employer“.

Moreover, the Court – expressly recalling a previous case law (see judgement 13352/2014) – ruled out any profile of nullity of the clause, pointing out, however, that it had been the parties themselves, in their full negotiating autonomy, “to regulate their own interests“.

The worker thus appealed against the decision of the Court.

The decision of the Court of Appeals of Milan

In the opinion of the Milan Court of Appeals, the failure of the employer to exercise its right of option makes it possible to state that no agreement had been reached between the parties and that, as a result, no right to remuneration had arisen for the employee. In fact, it should be considered that in the typical structure provided for by the law, “the party bound by the option, i.e. by their own statement, is not bound by the final contractual performance until the other party accepts it, thus constituting the final contractual relationship“.

The District Court then remarked that the institution of the option under Article 1331 of the Italian Civil Code is part of a more complex case of progressive formation of contracts, initially consisting of an agreement concerning the irrevocability of the proposal of the promisor, and, subsequently, of the (possible) acceptance of the promisor, who, settling with the previous proposal, completes the new legal transaction.

According to the Court of Appeals, the perfection scheme is therefore not that of the proposal-acceptance, but that of the preparatory option contract, followed by the exercise of that right, by means of a unilateral declaration of acceptance within a period fixed in the contract itself or, failing that, by the judge. And, therefore, once this period has expired, the option is no longer valid, since it is a period of validity of a contract and not of irrevocability of the proposal.

In essence, the right of option is a potestative right, since it corresponds, on the passive side, to a position of subjection, given that, at the sole initiative of the option holder, the grantor may be subject to the conclusion of the final contract.

Last but not least, the Court of Appeals pointed out that there had been no constriction to the worker’s contractual freedom. This was because he himself had voluntarily resigned by accepting a different job offer and had not shown that he had been limited by the company’s failure to notify him of the exercise of his option.

In light of the above, the Court of Appeals rejected the employee’s appeal against the judgement of first instance, not finding any violation of the law inherent to the right of option under Article 1331 of the Italian Civil Code.