Non-solicitation clauses in sales & employment contracts: best practices in Czechia

Companies often use non-solicitation clauses to stop employees from joining competitors or customers. We’re used to assessing these agreements under general contract and labour law. But developments on the EU level bring a fresh perspective: we also need to check for compliance with competition rules. Regulators in some countries, like Slovakia, seem ready to ban non-solicitation clauses altogether. The Czech competition authority’s approach isn’t as strict, but it has already started audits of non-solicitation clauses, so read on to see what’s in store.

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What are non-solicitation clauses?

With a non-solicitation clause, companies try to prevent clients or ex-employees from soliciting their staff to work for a competitor or customer. Typically, you’ll find these clauses in sales or employment contracts. 

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Czech law sees non-solicitation clauses as a type of commercial non-compete clauses regulated by the Civil Code. They’re time-bound to a maximum of 5 years and must specify the affected markets or personnel.  

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They shouldn’t be confused with non-compete clauses in employment contracts that are governed by a much stricter regime of the Labor Code. Based on currently dominant interpretation, non-solicitation clauses aren’t subject to these stricter requirements, which means their duration is not limited to 12 months and no statutory compensation is required. In any case, caution is advised because the Supreme Court hasn’t provided clear guidance on this and it may change its interpretation in the future (forcing commercial non-solicitation clauses under the non-compete regime).

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What’s the current regime?

Competition regulators across the EU see non-solicitation clauses as a possible disruption to competition. They restrict hiring of experienced workforce in the industry, limit their freedom to find a new job and negotiate higher salaries - and as a result, they can limit a competitor’s ability to enter a market or expand on the market. 

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As a result, the general regulatory approach to non-solicitation clauses is as follows:

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• No-hire clauses (committing to not hiring employees from another company) are prohibited.
• Active non-solicitation clauses should be reasonable and proportionate, which means they should be time-bound and restricted to a specific group of employees (typically employees with specific knowledge who were in direct contact with a customer or competitor).

Non-solicitation clauses also seem to be acceptable whenever the parties need to protect their interests, like in the context of M&A or transfer of undertaking deals. But you still need to tie the clause to a time limit and territory. 

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How can you enforce your non-solicitation clause?

Enforcing non-solicitation clauses can be tricky. Their breach is often hard to prove and they can be easily by-passed, especially if the hiring company runs an external recruitment process or publishes general job ads on its web or other channels, making it easy for your employees to apply independently. 

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So, what can you do to increase your chances? First, include contractual penalties in your sales contracts - these can incentivize compliance and, when push comes to shove, help you get some money back. Just check with a lawyer to make sure the penalties comply with local law. Second, don’t rely only on non-solicitation clauses. Instead, combine them with other measures. For instance, sign an NDA with your staff and, whenever an employee is leaving the company, specifically highlight the obligation to keep trade secrets and other sensitive business information confidential. Finally, implement security measures that trigger an alert whenever an employee downloads a large amount of data to identify and address attempted breaches.

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In a nutshell

Non-solicitation clauses make sure your employees don’t join competitors or customers. Based on a current EU trend, we now have to check compliance with not only labor and contract law, but also with competition rules. Czech competition authorities are already busy auditing existing non-solicitation clauses, so make sure you’re one step ahead: limit their scope and duration, add contractual penalties for breach in your sales contracts and sign NDAs with your employees.

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Need a hand with all that? Reach out to our experts here. 

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