The Compensation For Signing A Non Compete Agreement is a critical document used when an employer wishes to prevent an employee from engaging in competitive activities after their employment ends. Under German law, post-contractual non-compete agreements are only enforceable if adequate compensation is provided to the employee. This document establishes the terms of such compensation, which must be at least 50% of the employee's last contractual remuneration, as mandated by the German Commercial Code (HGB). It is typically used for employees in senior positions or those with access to sensitive information, trade secrets, or important client relationships. The agreement specifies the scope of restricted activities, geographical boundaries, duration (up to 2 years maximum), and payment schedule. It must balance the employer's legitimate business interests with the employee's constitutional right to freely choose their occupation under German law.
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1. Parties: Identification of the employer and employee, including full legal names and addresses
2. Background: Context of the agreement, including reference to the employment relationship and reason for the non-compete arrangement
3. Definitions: Key terms used in the agreement, including 'Competitive Activity', 'Compensation', 'Restricted Period', and 'Restricted Territory'
4. Scope of Non-Compete Obligations: Detailed description of prohibited competitive activities, geographical limitations, and duration of restrictions
5. Compensation Amount and Payment Terms: Specification of the compensation amount (minimum 50% of last contractual remuneration), payment schedule, and method of payment
6. Duration and Termination: Period of the non-compete obligation (maximum 2 years under German law) and conditions for early termination
7. Tax Treatment: Clarification of tax obligations and responsibilities regarding the compensation payments
8. Breach and Remedies: Consequences of breaching the agreement and available legal remedies
9. Governing Law and Jurisdiction: Specification of German law as governing law and competent courts
1. Garden Leave Provisions: Used when the agreement includes provisions for garden leave during the notice period, offsetting against non-compete compensation
2. Continuing Obligations: Added when there are additional ongoing obligations beyond the non-compete restriction
3. Third Party Rights: Included when the agreement needs to address rights of affiliated companies or successors
4. Severability: Optional clause addressing the survival of remaining provisions if parts are found invalid
5. Alternative Employment: Used when specifying conditions under which the employee may take alternative employment with compensation offset
1. Schedule 1: Calculation of Compensation: Detailed breakdown of how the compensation amount is calculated, including base salary, bonuses, and benefits considered
2. Schedule 2: Restricted Territory: Detailed map or list of geographical areas where competitive activities are restricted
3. Schedule 3: Competitive Activities: Comprehensive list of specific activities, companies, or industry sectors considered competitive
4. Appendix A: Previous Employment Terms: Reference to relevant terms from the employment agreement that affect the non-compete obligations
5. Appendix B: Payment Schedule: Detailed timeline of compensation payments, including dates and amounts
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