Non-competition agreement: tax and social security profiles (Corriere delle Paghe de Il Sole 24 Ore, 6 May 2021 – Roberta De Felice, Andrea Di Nino)

Article 2125 of the Civil Code defines a non-competition agreement as restricting “the employee’s activities, after contract termination.”

The agreement is a valuable tool for the parties to mutually govern fundamental aspects of employment relationship termination in some circumstances (for example, for high professionalism and specialisation). This agreement restricts the employee’s right to carry out professional activities which compete with the previous employer for a given period after the relationship termination, extending the loyalty obligations under art. 2105 of the Italian Civil Code imposed on the employee during employment.

The Case law explained that “Non-competition clauses are aimed at protecting the employer from exporting the company’s intangible assets to rivals. This includes internal factors (technical and administrative organisation, work methods and processes, etc.) and external factors (goodwill, clientele, etc.). These assets ensure the company endurance on the market and its success compared to rivals.”(Court of Cassation no. 24662/2014).

The above article 2125 of the Italian Civil Code outlines non-competition agreement features, without which the contract will be null and void, namely:

• written format;
• identification of subject and place restrictions;
• identification of a time limit set at a maximum of five years for managers, and three years for other cases;
• presence of a determined or determinable fee in favour of the service provider.

Continue reading the full version in Italian on Corriere delle Paghe – Guida al Lavoro de Il Sole 24 Ore.