In accordance with the provisions set forth in the Article 21.2 on the Workers’ Statute (Estatuto de trabajadores) [ET], the employers and workers may agree on a non-competition covenant for after the expiry of the work contract. Nonetheless, as involving freedom of work stated in the Article 35 of the Spanish Constitution, this covenant must comply with the following requirements in order to be licit and valid:
(1) The covenant should not last more than two years for the technicians and six months for the rest of the workers;
(2) The employer should have a real industrial or commercial interest regarding it; and
(3) The worker must be gratified with an adequate monetary compensation
Once the covenant is signed, its effects must be complied for its entire duration and worker’s failure to comply these will results in the obligation to refund the employer the compensation perceived in this regard, as long as the truth and quantity of the damages are proved, as well as its causal relation with the workers’ conduct (Supreme Court’s ruling on 2nd January and 3rd February 1991).
According to the TS’ standardized doctrine, if the worker does not regard obligation to the non-competition covenant, in theory, he is obliged to refund the paid quantity as consequence of such, valid or not. The covenant’s validity allows the employer to apply for compensation that, if confirmed as a possible damage, can exceed the amount of compensation paid by the company during the course of the contractual relation. On the contrary, if the covenant is not valid, the employer cannot advocate an action for damages, but he may advocate the refund of the paid quantities, both in virtue of the Article 9, paragraph 1 of the ET, none of them under prejudice of a balanced analysis.
Notwithstanding, there are two disputing opinions regarding the reimbursement.
One of them insists that the lack of proportionality of the compensation agreed on the sacrifice requested to the worker of its non-competition covenant and, thus, the covenant’s legality for not complying with legal requirements, if the insight of the worker did not receive compensation, it should be presumed that the effective work would be repaid. The other opinion states that as a consequence of the nullity of the covenant, the insight has become compensation without cause, therefore the worker has the obligation to repay the earned quantities as such.
Regarding this controversy, the Labour Chamber of the Supreme Court of Justice in Santa Cruz de Tenerife observed in its ruling, on 28th February 2015, that “in order to resolve the dispute, it is essential to point out that the nullity of the covenant at issue implies a partial nullity of the work contract; and, for that matter, conditions the enforceability of the Article 9.1 of ET”, and continually affirms that the unified doctrine can be summarized in the following expressions:
a) Prevention contained in Art. 1303 CC [Civil Code], considering the mutual refund of the benefits in the event that obligation was declared as null, does not deplete legal regulation in the field;
b) Labour law embodies the common regime on the partial nullity regarding legal business, consistent in the elimination of opposing terms to mandatory provisions and its mandatory replacement of the content to the necessary rules of laws alluded;
c) Although this partial nullity of the covenant raises a question regarding the assignment corresponding to the total economic compensation paid, such matter should be solved in view of the second section of the Art. 9.1 ET;
d) ET bestows to the judicial discretion the fate of the economic benefit to be paid by the worker.
Based on such doctrine, the Chamber concluded that, in this case, the covenant may be designated as null and, as a consequence, la insight of the worker has become compensation without cause. Therefore, the worker falls back into the obligation of refunding the amount received by the non-competition covenant. However, in respect of the returning amount, the worker only has to repay the agreed in respect of non-compliance of the covenant, and not the amount received as a plus of competition during the contract period.
The reasons for concluding are as follow:
– The covenant agreed between the employer and the worker only states that if the non-competition agreement was not complied, the worker shall be obliged to compensate the company with the correct amount, but it contains no reference whatsoever that if post-contractual breach of the non-competition agreement, the worker should return the company the amount paid during the term of this contract as a non-competition plus.
– It is worth adding the consideration that the above criterion might be unfair in cases of contract termination due to dismissal by a court to be declared inadmissible.
We can conclude this judgment that, when an employer makes a covenant on non-competition covenant to the worker, so that the employer can claim a refund of compensation paid to the employee who has violated the non-competition covenant, it must be manifested explicitly in the agreement and also it is applicable only if the end of the employment relationship with the worker had not been caused by unfair dismissal.
Mika Otomo
Vilá Abogados
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24th December 2015
