Can a non-compete clause stop me from taking a new job in Switzerland?
You have left — or are about to leave — your job in Switzerland.
Your employment contract says that you cannot work for a competitor for the next 12 or 24 months. Perhaps it also contains a substantial contractual penalty.
Does that mean you cannot accept a new job?
Not necessarily.
Swiss law allows post-employment non-compete clauses, but places significant restrictions on when and how they can be enforced.
The fact that a clause appears in your signed employment contract is therefore only the beginning of the analysis.
A non-compete must meet specific legal requirements
Under Swiss law, a post-employment non-compete must in particular be agreed in writing.
More importantly, it is only binding where the employment relationship gave the employee access to the employer's customer base or to manufacturing or business secrets, and the use of that knowledge could cause the former employer substantial harm.
This means that an employer cannot automatically prevent an employee from working in the same industry simply because the employee acquired experience or professional skills while working there.
The employer needs a legitimate interest capable of protection.
Knowing customers is not always enough
Many non-compete clauses are based on access to clients.
But even that does not automatically make the clause enforceable.
The Swiss Federal Supreme Court has held that a non-compete based on knowledge of customers may not be justified where clients primarily follow an employee because of that employee's personal skills and abilities, rather than because the employee can exploit confidential knowledge of the former employer's customer base.
This may be the case, for example, where clients choose to follow a dentist, consultant, trainer or other professional because of the personal relationship they have developed with that individual and the particular trust they place in his or her skills. Swiss case law has, for instance, considered the personal relationship between a dentist and patients, as well as the individual qualities of training coaches, to be potentially decisive.
By contrast, the argument is much weaker where the employee's ability to attract customers depends mainly on access to the employer's customer lists, purchasing habits, pricing information or other commercially valuable knowledge.
Every case nevertheless depends on the employee's actual position and the nature of the business.
The restriction cannot be unlimited
Even where a non-compete is valid in principle, its scope must remain reasonable.
Swiss law requires the restriction to be appropriately limited in terms of:
geographical area;
duration; and
the type of business activity prohibited.
A restriction must not unfairly compromise the employee's economic future.
As a general rule, a non-compete should not exceed three years, except in special circumstances. A court may also reduce an excessive restriction rather than enforce it exactly as drafted.
A clause preventing someone from working anywhere in Europe in a very broad industry will therefore raise different issues from a narrowly drafted restriction concerning specific competing activities in a defined market.
Who terminated the employment relationship can be decisive
This is one of the most important points — and one that employees often overlook.
Under Article 340c of the Swiss Code of Obligations, a non-compete generally ceases to apply where:
the employer terminates the employment relationship without the employee having given justified cause for doing so; or
the employee resigns for justified reasons attributable to the employer.
Consequently, an employee who has been made redundant or dismissed by the employer may be in a very different position from an employee who voluntarily resigns in order to join a direct competitor.
However, this does not mean that every dismissal by the employer automatically eliminates the clause. The circumstances leading to the termination still matter.
This point should therefore be examined carefully before assuming that the restriction either applies or disappears.
What if my contract contains a penalty?
Many Swiss employment contracts attach a contractual penalty to the non-compete clause.
The amount can be significant.
A penalty clause does not, however, transform an otherwise invalid non-compete into a valid one. The first question remains whether the restriction itself is legally binding.
Where a valid non-compete has been breached, Swiss law may allow the employer to claim damages and, where agreed, a contractual penalty.
In certain circumstances, the employer may also seek an order requiring the employee to stop the competing activity. This additional remedy must, however, have been expressly reserved in writing and is subject to further conditions.
Receiving a letter demanding payment of a contractual penalty therefore does not necessarily mean that the amount is actually owed.
Do not wait until after joining the competitor
Non-compete disputes become considerably more difficult once the employee has already:
started working for a direct competitor;
contacted former clients;
transferred business;
disclosed confidential information; or
received a formal demand from the previous employer.
If you are considering a new position, it is usually preferable to review the clause before signing the new employment contract.
This allows the actual risk to be assessed and, where necessary, the situation to be negotiated.
International employees may have additional questions
Executives working in Switzerland frequently have employment contracts involving a foreign parent company, international group structures or duties extending across several countries.
This can raise additional questions concerning applicable law, jurisdiction and the geographical reach of a non-compete clause.
A contractual reference to several countries does not by itself mean that the restriction will automatically be enforceable everywhere.
So, can a non-compete stop you from taking a new job?
The answer depends on much more than the wording of the contract.
The key questions normally include:
Did you genuinely have access to protectable customer information or business secrets?
Could using that information significantly harm your former employer?
Is the restriction reasonable in duration, geography and scope?
Who terminated the employment relationship — and why?
Does the clause contain a contractual penalty or a right to seek an injunction?
In some cases, the non-compete will be enforceable. In others, it may be partly enforceable, reduced by a court or entirely ineffective.
The important point is that you should not assume that you are prevented from taking a new job simply because your employment contract contains a non-compete clause.
Are you considering joining a competitor or have you received a demand from your former employer?
Bénard Avocats advises employees, executives and employers on Swiss non-compete clauses and employment disputes. Consultations can be conducted in English and by videoconference.