Parties to an employment relationship may, pursuant to Articles 1011 – 1014 of the Labour Code Act of 26 June 1974 (Journal of Laws 2014.1502, as amended; hereinafter: “Labour Code”), enter into a non-competition agreement. A clause to that effect may be incorporated in the employment contract or constitute a separate instrument. The parties may ban competition for the time when they remain bound by an employment relationship and thereafter. The essence of having the non-competition clause to survive the end of the employment relationship is that the employee is bound not to undertake competing activities in relation to their employer after the employment relationship is terminated, within the scope and for the time stipulated in such non-competition agreement, while the employer is bound to pay the employee specific compensation in this regard.
While, in accordance with Article 231 of the Labour Code, in the event that an employer business or its part is transferred to another employer, the latter becomes, by operation of law, a party to the existing employment relationship. This article transposes Article 3 of Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights, in the event of transfers of undertakings, businesses or parts of undertakings or businesses. Transfer of an employing business to another employer may take place as a result of, for example, a lease agreement being concluded for or of the inheritance of the business. However, the most common example of such transfers is the sale of a business. On the date of transfer of the employer business or its part, the transferee assumes all the rights and obligations of the transferor, and becomes a party to any employment relationships with the employees. Such effect occurs by operation of law, that is without the need to take any actions. Bearing in mind the provisions of Articles 1011 – 1014 and Article 231 of the Labour Code, the question arises if the new employer continues to be bound by non-competition agreements concluded by its predecessor.
In its judgment issued on 11 February 2015 in case no. I PK 123/14, the Supreme Court held that Art. 231 of the Labour Code provides for automatic accession by a new employer to the existing employment relationship but not to the generality of legal relationships binding the employer and the employee. Therefore, in order to determine whether or not the non-competition agreements concluded by the previous employer are binding on the new employer, it needs to be clarified if a non-competition agreement continues to form a part of the said relationship after the employment relationship is terminated. This issue was clearly resolved by the Supreme Court in the cited judgment. In the opinion of the adjudicating panel, non-competition agreements are not part of an employment relationship once the previous relationship has been terminated. This view has been accepted by legal scholars and confirmed by the resolution of the Supreme Court issued on 6 May 2015 in case no. III PZP 2/15.
Therefore, in accordance with legal scholars and the established case-law of the Supreme Court, the new employer who takes over an employer business together with its employees is not bound by non-competition agreements concluded with these employees by the previous employer. In light of the above, an employer taking over an employer business or its part should keep in mind that if it wants the employees transferred to be bound by a non-competition clause after their previous employment relationship has been terminated, it needs to conclude new non-competition agreements with them.