📝 Is a non-compete valid if the employer pays no compensation?

With conditions

Quick answer

It depends — a non-compete does not bind the employee if no compensation is paid, and the myth "the compensation requirement only appeared in 2023" is false. Under Article 38 of the Labour Code (in force since 1 July 2017), during the non-compete period the employee must be paid compensation of at least 40% of their average pay. The agreement is possible only with employees who have special knowledge or skills and, after the employment ends, lasts no longer than 2 years. It must set out the prohibited activity, the compensation, the territory and the term. Most importantly, and often overlooked: the 40% rule applies not since 2023 but from the 2017 Labour Code itself – in 2023 the Supreme Court simply ruled for the first time that the duty to pay is imperative, and without compensation the agreement has no effect on the employee.

📋 The rules

During the non-compete, compensation of at least 40% of average pay must be paid (Labour Code Art. 38)
The agreement is possible only with employees who have special knowledge or skills
After the employment ends, the agreement lasts no longer than 2 years
It must define the prohibited activity, compensation, territory and term
If the employer is more than 2 months late paying, the employee may terminate the agreement unilaterally

🔓 Exceptions

An employee who breaches the agreement must stop the competing activity, return the compensation received and cover the damage
Pre-agreed penalties exceeding 3 months' compensation are invalid
A non-compete without compensation, or with an employee lacking special knowledge, does not bind the employee

⚠️ Penalties & fines

Here the "penalty" cuts both ways, and the costliest mistake is to assume an unpaid agreement still ties the employee. If the employer does not pay the non-compete compensation, the agreement has no legal effect on the employee, so trying to bar them from working or to claim penalties through court will fail. Often overlooked: an employee who breaches a valid (paid) agreement must not only stop the competing activity but also return the compensation received and cover the employer's loss. Even so, pre-agreed penalties exceeding 3 months' compensation are invalid, so disproportionate fines cannot be demanded. Employment disputes are heard by labour dispute commissions and courts, and if they find compensation was unpaid or the terms unfair, they can declare the agreement non-binding, so it is safer for both sides to put everything in writing and pay on time.

📎 Official sources

Last verified: 2026-07-12

❓ Frequently asked

Is a non-compete valid without compensation?

No, under Article 38 of the Labour Code the non-compete period must be paid at least 40 percent of the employee's average pay as compensation. The Supreme Court ruled that this duty is imperative, and without compensation the agreement has no legal effect on the employee.

Since when has the 40 percent rule applied?

The rule applies not since 2023 but since the Labour Code that took effect on 1 July 2017. In 2023 the Supreme Court spoke on non-compete for the first time and confirmed that paying compensation and the duty not to compete are inseparable and cannot exist without each other.

How long can a non-compete last?

After the employment contract ends, a non-compete may last no longer than two years from the end of the employment relationship. It is possible only with employees who have special knowledge or skills that they could apply in a competing activity and thereby harm the employer.

What can I do if the employer is late paying?

If the employer is more than two months late paying the compensation or part of it, the employee has the right to terminate the non-compete agreement unilaterally. In that case the employee regains the freedom to take competing work, and can turn to a labour dispute commission over the unpaid sums.

What happens if I breach a valid agreement?

An employee who breaches a paid non-compete must stop the competing activity, return the compensation received and cover the damage caused to the employer. Even so, pre-agreed penalties exceeding three months' compensation are invalid, so disproportionate fines cannot be demanded.

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