Under Spanish law, employees are legally bound by a non-compete obligation during their employment relationship. In other words, unless permitted by the employer, employees cannot perform any labour or professional activity which competes with the activity of their employer.

In addition, employer and employees can establish a post-contractual non-compete obligation. This obligation – which cannot exceed a two year or six month period (depending on the professional category of the employee) from the end of employment – will only be valid if the following requirements are met:

  • The company has an effective commercial or industrial interest in establishing a post-contractual non-compete obligation.
  • The employee receives an adequate economical compensation from the company for the obligation.

Payment of the compensation may be made either while the employment relationship is still in force or after its termination — to strengthen the enforceability of the post-contractual non-compete obligation the best option is to make the payment after termination. The payment usually consists of a percentage of the employee’s salary and, although the law does not provide a guideline on "adequate compensation", it would be around 50-60% of the employee’s annual fixed gross salary, based on case-law. If the compensation is not considered adequate, the non-compete agreement would not be enforceable.

It is common practice in Spain to introduce penalty clauses in post-contractual non-compete agreements in case the non-compete obligation is breached by the employee. Nevertheless, if a penalty is established, the Labour Court could moderate it. In principle, Labour Courts are reluctant to accept penalties which are over the compensation received by the employee for the post-contractual non-compete obligation.

In accordance with Spanish law, the non-compete clause agreed between the parties would be valid even when the termination of employment is not justified, unless otherwise agreed. Therefore, if nothing specific has been agreed on this, the non-compete clause would apply whatever the reason for termination (fair dismissal, unfair dismissal, voluntary resignation, retirement, etc).

Finally, it is important to highlight that, once a post-contractual non-compete obligation has been established, the employer will not be entitled unilaterally to waive the obligation. In practice, if employer and employee have entered into a post-contractual non-compete agreement in which compensation has been agreed, the employee will be entitled to the compensation, even if the employer is not interested in maintaining the non-compete obligation in force when the employment is terminated. In order to waive this non-compete obligation, an agreement between the parties will be required.

Confidentiality

Under Spanish employment law, there is no specific provision relating to the confidentiality obligations of ordinary employees. Nevertheless, under the Spanish Statute of Workers, employees must behave in good faith and case-law has established that confidentiality obligations must be understood as included within good faith. In light of the lack of specific statutory provisions regarding confidentiality, it is very common to regulate these obligations in employment contracts.

However, there is a particular confidentiality obligation affecting employee representatives. Spanish employment law entitles employee representatives to receive certain information about the employer's business. The Spanish Statute of Workers requires the employee representatives and any expert or counsel assisting them to keep confidential all the information provided by the employer that is identified as confidential information.