A major turning point for competition clauses

In its recent ruling (II. ÚS 1889/19), the Constitutional Court of the Czech Republic fundamentally reversed the case law of the general courts regarding the possibility of unilateral withdrawal from a non-competition clause by an employer. Until recently, the controversial case law of the Supreme Court on the interpretation of Section 310(4) of the Labour Code and Section 211 of the Civil Code was applied in practice, which was aimed at the fact that the employer could not withdraw from a non-competition clause without giving a reason, even if such possibility had been agreed with the employee in advance. Such a withdrawal was held to be null and void in view of the special protection of employees’ rights. The case law required a specific reason to be agreed for the employer to unilaterally withdraw from a competition clause. That reason must then be found to be “fair” in the light of the particular circumstances.

However, the Constitutional Court largely corrected this conclusion by confirming that the general courts had exceeded their competence to interpret the text of the law, had restricted the freedom of the contractual relationship between the parties and had interfered with the right to conduct business. Thus, the Constitutional Court confirmed that it is possible to negotiate the possibility for unilateral withdrawal from a non-competition clause by the employer, even without giving a reason. Finally, however, the Constitutional Court pointed out that care must still be taken to ensure that such a possible withdrawal from a non-competition clause is not an abuse of rights by the employer, the purpose of which would be to harm employees’ rights (such a situation could arise, for example, if the employer unreasonably waited until the last possible date to withdraw, thereby restricting an employee's choice of new employment).