Under German statutory law, a post-contractual non-compete clause is enforceable only if it provides for adequate compensation. Such compensation must be at least 50 percent of the employee's total remuneration.
Non-compete clauses in the United Kingdom or United States do not typically provide for compensation.
In Germany, once validly agreed (with at least 50 percent compensation provided for), the employer cannot simply waive the post-contractual non-compete obligation with immediate effect. Instead, the employer is released from the duty to pay the agreed compensation only after one year following the written waiver.
In this case decided by the Federal Labor Court, the plaintiff had a post-contractual non-compete clause in her contract which did not provide for any compensation. It did, however, contain a severability clause according to which any unenforceable contractual provision should be deemed replaced by a valid and enforceable one.
The employee observed the post-contractual non-compete obligation and claimed payment of a non-compete compensation in the amount of 50 percent of her last contractual remuneration. She won in the first two instances.
In the final instance, the Federal Labor Court reversed the outcome and decided in the employer's favor—a non-compete clause not providing for any compensation is void and cannot be saved by a severability clause. The employee was denied the compensation.
This decision is certainly good news for those employers who do not pay compensation on purpose in the hope that the employee will abide by the post-contractual non-compete obligation (accepting it would not be enforceable in light of the lack of compensation).