Ever-increasing market competitiveness makes entrepreneurs increasingly interested in protecting themselves against the possible dissemination of company knowledge (data, working processes, company notions, confidential customer names) acquired by their employees during their employment to competing companies. The non-competition agreement, as governed by Art. 2125 of the Civil Code, is one of the tools available to companies to protect this interest following the employment relationship termination. However, the agreement validity is subject to precise rules and limits that are only partly defined by Law. The Webinar highlights the critical issues and opportunities of the competition limiting clause during employment relationships, providing participants with valuable guidelines for its correct practical application.

Date : 9 March 2022
Time 10 – 11 am


Speakers: 

Adv. Enrico De Luca
– Partner – De Luca & Partners 

Adv. Luca Cairoli – Associate – De Luca & Partners


Click here to register.

The Court of Cassation, with order no. 23418 of 25 August 2021, returned to deal with the subject of requirements for validity of non-competition agreements. The Court’s ruling is based on appeal lodged by a bank manager who (among other claims submitted) had challenged a signed non-competition agreement, considering it vitiated, since the payment was paid during employment and was random and at any rate inconsistent, thus amounting to a violation of the requirement cited in art. 2125 of the Italian Civil Code. In the case in question, the non-competition agreement included the manager’s commitment not to perform, in certain regions of north and central Italy, similar activities or duties as those performed for the Bank for the duration of three months, for a payment equal to 10,000 euro per annum, to pay annually together with the monthly salary.

The Court of Milan, asked to rule on the merits, had acknowledged and declared the nullity of the non-competition agreement, and with that releasing the manager from payment of the penalties for breaching it, however sentencing the plaintiff to return the sum received as payment. During the next challenge of the ruling, the Milan Court of Appeals, overturned the decision of the lower court on the point, declaring the non-competition agreement valid holding that no irregularity existed (in terms of randomness or inconsistency) regarding the quantification of the payment that, on the contrary could, according to the Court, be validly paid during employment along with remuneration. Objecting to the higher court’s ruling, the manager lodged an appeal with the Court of Cassation.

Continue reading the full version published in Norme & Tributi Plus Diritto of Il Sole 24 Ore.

Non-competition agreement – Agreement nullity – Remuneration – agreement onerousness – Remuneration Determination/Determinability

Court of Cassation, 1 March 2021, no.  5540

“Concerning the non-competition agreement entered into with an employee, the mere provision that the agreement is onerous excludes the extreme sanction of the agreement’s nullity may be applied if there is a financial imbalance of the services, unless there is an agreement of symbolic compensation or manifestly unfair or disproportionate to the employee’s sacrifice and loss of earning potential.”

Facts of the case

The Court of Appeal of Milan, reforming the ruling of first instance,

  • declared the nullity of the non-competition agreement signed between the company and an employee,
  • ordered the company to repay the amount paid under the ruling of first instance.

It argued as follows: “the agreement in question is null and void because there is no determination or determinability of the remuneration paid to the employee considering the professional limitations imposed by the employer and because it is consequently impossible for the employee and the judge to ascertain its fairness with the professional sacrifice required.”

The local Court held that it was clear from a reading of the agreement clauses that no provision had been made for a minimum duration of the agreement or for the employee’s payment of a guaranteed minimum amount to be established in advance if there was an employment relationship termination.

The agreement was structured so that if there was an employment relationship early termination, the employee was not entitled to full compensation, i.e. €18,000 gross (€6,000 gross multiplied three years), but only the amount accrued during the year or part of it.

The remuneration amount was not established and could not even be determined based on objective parameters. Instead, it depended on a variable linked to the relationship duration, which led to an imbalance between the parties and an unbalanced contractual structure in the employer’s favour. This made the established remuneration incongruous and the agreement null.

The company appealed to the Court of Cassation against that ruling, claiming a strong contrast between opposing statements and objectively incomprehensible reasoning. The employee responded with a counter-appeal.

The Supreme Court of Cassation’s ruling

The Supreme Court found the employer’s complaint to be well-founded and, in support of its decision, made the following points.

The non-competition agreement is an autonomous form of negotiation (Court of Cassation, ruling no. 16489/2009) and nothing more than a contract for pecuniary interest and remuneration in return for which:

  • the employer undertakes to pay a sum of money or other benefits to the employee so that for
  • the time following the employment relationship termination, the latter undertakes not to engage in activities in competition with those of the employer (Court of Cassation, ruling no. 2221/1988).

As an entirely autonomous agreement from the employment contract, the remuneration agreed upon must meet the general requirements of determination or determinability imposed by Art. 1346 of the Italian Civil Code for the service subject, under penalty of agreement nullity.

What are the interests underlying the agreement?

The purpose of the non-competition clause is to safeguard the entrepreneur from any “transfer to competing undertakings” of the company’s intangible assets and protect the employee. This prevents the clause from excessively restricting possibilities to direct work towards other more convenient occupations (most recently, Court of Cassation, ruling no. 9790/2020).

Continue reading the full version published in Guida al Lavoro of Il Sole 24 Ore.

Marco Giangrande and Antonella Lacobellis lectured during of the 23, 24 and 25 November Labour Law module training course. The module was part of the “Diritto e Impresa” (Milan) master’s course organised by Il Sole 24 ORE Business School.

The course focused on the labour law sources, the essential elements of the subordinate employment relationship, necessary and accessory clauses of the subordinate employment contract, fixed-term contracts, the exercise of disciplinary power and the transfer, secondment, and travel regulations.

During Marco and Antonella’s lecture, several exercises were held to allow participants to put shared ideas into practice.

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Marco Giangrande and Antonella Lacobellis lectured during of the 23, 24 and 25 November Labour Law module training course. The module was part of the “Diritto e Impresa” (Milan) master’s course organised by Il Sole 24 ORE Business School.

23 November 2020:

The lecture dealt with labour law sources, the establishment of the employment relationship, the subordinate employment and self-employment relationship typifying elements, art. 2103 of the Italian Civil Code. “Jus variandi”, with particular focus on demotion and fixed-term contracts.

Exercise: drafting of a non-competition agreement.

24 November 2020:

The lecture dealt with the exercise of disciplinary power and the transfer, secondment and travel regulations.

Exercise: A business game, consisting of solving a company case, through a path of multiple-choice questions. This experiment allowed participants, who were divided into teams, to learn, by playing, to correctly impose a disciplinary sanction to avoid worker repercussions.

25 November 2020:

The lecture’s covered the defence of the company in court and facing a working hearing. It looked at the introductory appeal of the case, work behind the scenes, the close collaboration between lawyer and client, the trial process, first hearing, witness examination and the hearing.

Exercise: drafting of a letter of disciplinary action and examination of an appeal under art. 414 Code of Civil Procedure following an appeal against dismissal for objective reasons.

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.