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The closure of the company means exemption from the competition clause

| News | Employment Law and Social Security

Alfredo Aspra analyzes the sentence of the Superior Court of Justice of Madrid

In the case of an employee who has a clause in his employment contract prohibiting him from competing with his company once his relationship with it has ended is released from that limitation once the company has been wound up in insolvency proceedings. This is due to the fact there is no longer any commercial or industrial interest on the part of the employer, nor does the employee need to ensure economic stability once the contract has expired, he can provide services in competition with the business, without there being any restriction on his freedom to work, since the business activity has ceased.

This was established in two judgments of the Madrid High Court of Justice, of 30th June and 16th July 2020 respectively. It was ruled that in order to calculate the compensation of the employees of a company in insolvency proceedings, the non-competition agreements, at the end of the employment contract, of those employees who had such an agreement and who were paid on their pay slips, must be taken into account in the calculation. 

Alfredo Aspra, Andersen partner, explains that the jurisprudence of the Supreme Court establishes that, the non-competition pact for after the employment contract has expired, insofar as it implies a restriction of the freedom to work enshrined in article 35 of the Constitution and reflected in article 4.1 of the Workers' Statute, contained in article 21. 2 of this legislative text, as well as in Article 8.3 of the Decree regulating this special relationship. Similar precepts require for their validity and lawfulness, apart from their limitation in time, the concurrence of two requirements, on the one hand, that a commercial or industrial interest by the employer is justified, and, on the other hand, that financial compensation is established.

The full article can be read in El Economista

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