By Chiara Monaco (DLA Piper Rome).
The fashion world is characterized by a very high level of competition detectable between the brands that operate in this sector.
In Italy the competition between companies which operate in the same sector can be managed through the inclusion, in the employment contract, of a non-competition covenant: the aim of this covenant is to limit the performance of the employee, after the termination of the employment relationship.
In particular, the non-competition covenant, under Italian law, is governed by Section 2125 of the Civil Code which covers the employment relationship. Post termination restrictions for self-employees (contractors) do not fall under the scope of application of such provision.
This aim is pursued by providing for the non-competition agreement to be valid only on the following conditions, imposed under penalty of nullity:
- the agreement must be in writing;
- it must have a maximum duration of 5 years for executives (dirigenti) and of 3 years for other employees;
- it must be kept within precise territorial limits and activity limits, which must not be too wide compared to the duration of the restriction and the remuneration awarded to the individual;
- a specific and identifiable remuneration, over and above the normal salary, shall be directed to reward the obligation not to compete; such remuneration must be reasonable and proportionate to the scope of the restrictions imposed on the individual.
As a general principle, it is valid if it leaves the employee, after the end of the employment relationship, substantial job possibilities coherent with his/her skills.
As anticipated above. non-competition covenants may only be deemed valid and enforceable if they set forth a specific consideration in favour of the employee.
In this regard, the law does not indicate the amount to be set as remuneration. According to some court precedents, adequate compensation for a 1 year non-compete covenant could be considered that amounts ranging from 30% to 50% of the last salary paid to the employee at the termination of the employment relationship. It remains that the actual compensation may change depending on geographical extent of the covenant and its actual scope.
According to recent case law the amount due on the basis of the non-competition covenant must be paid subsequently to the termination of the employment relationship.
In case of breach of a valid and enforceable non-competition covenant, the employer has the right to request compensation for the damages suffered.
Frequently, such damages are predetermined by a “liquidated damages clause” contained in the covenant but often, during the proceedings, the judges reduce it if deemed excessive.
Furthermore, in case of violation of the non-compete covenant the former employer may file a so-called “urgency procedure” provided by Italian Code of Civil Procedure, aimed at obtaining an injunction to inhibit the employee from performing in favour of the competitor the same activities carried out for the former employer.
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