New Supreme Court case law on non-competition restrictions and TUPE

Recently the Polish Supreme Court has delivered two judgements which concern whether post-termination restrictions included in a contract of employment bind the buyer in the event of a transfer of the undertaking (a TUPE transfer).

In Poland, an employee and employer may enter into a non-competition agreement, under which the employee undertakes not to compete with the employer for a certain period after the termination of his or her employment. The employer is ordinarily required to compensate the employee in respect such a restriction.

Historically it has not been clear whether a new employer upon a TUPE transfer is bound by a non-competition agreement entered into between the outgoing employer and the transferring employee notwithstanding that, under Polish law, the new employer is deemed to inherit all employment terms binding the previous employer.

The Supreme Court has now clarified that non-competition restrictions cannot be treated as a part of the employment terms which transfer on a TUPE transfer and therefore the new employer is not bound by them. However, the court has not addressed what happens to the restriction in the event of a transfer and whether it ceases to apply or continues to bind the employee and their previous employer.

The two judgements referred to above are very recent and written judgement in the latter is still awaited. It is hoped this judgement, when available, will clarify the court’s jurisdiction and pave the way for further case law.

“EU law compliance” amendments to the Labour Code

On 22 April 2015 the Polish Parliament commenced work on amendments to the Labour Code, which were found to be necessary following a CJEU judgment in March 2014 ( case C 38/13 - see September 2014 Briefing)

The redraft currently proposes the following amendments: limitation upon the length of fixed term contracts to a maximum of 36 months (including a 3 months probationary period), alignment of the notice periods applicable to termination of indefinite term contracts and fixed term contracts and changes to regulations on probationary period contracts.

The changes also envisage limiting permissible employment contracts to just 3 types: indefinite, fixed term and probationary period contracts. If implemented, this will mean current contracts for the performance of a specific task will no longer but valid. However, in practice, these are rarely used.

One question also being considered by Parliament, as part of its review, is whether so-called “garden leave” clauses, which purport to release an employee from the obligation to work during a notice period, will continue to be recognised. Whilst used in practice, such provisions are not regulated by the Labour Code.

The work of Parliament in addressing these issues is still in its initial stages. The final changes and the date on which they may come into effect are therefore yet to be confirmed. We shall report further as an when additional information is available.