Non-competition during unfair dismissal proceedings
In the LAG Düsseldorf’s opinion, an employee must, on the basis of the contractual non-competition clause applicable during the employment relationship’s entire legal term, not engage in any competitive activities, even after receipt of a termination without notice against which he takes legal action, if the termination later proves to be invalid.
Düsseldorf Regional Labor Court (“LAG”), decision of October 25, 2023 – 12 SA 262/23
Court of lower instance: Solingen Labor Court (“AG”), decision of March 14, 2023 – 1 Ca 826/22
In the specific case, the defendant, an employed tax advisor, was dismissed by the owner of the tax firm in December 2021 without notice and alternatively with due notice. The reason for the dismissal was an alleged breach of the non-competition clause. The defendant filed an action for unfair dismissal and was successful in the first instance (ArbG Solingen, judgment of November 16, 2022, 4 Ca 3/22). The owner filed an appeal against this decision, which had not yet been decided.
In the meantime, the law firm owner/plaintiff had also filed a lawsuit and prevailed with his action for injunctive relief for breach of the non-competition clause (AG Solingen of March 14, 2023, 1 Ca 826/22), as the defendant advised clients of the law firm on his own account from his private apartment, which was located near the law firm.
As the defendant ignored this ruling, the plaintiff again dismissed the defendant without notice on March 31, 2023. The defendant also filed an action for unfair dismissal against such dismissal.
The defendant appealed against the first-instance ruling regarding the duty to refrain from competition. The defendant’s appeal was partially successful.
The LAG held the ruling to be correct until the plaintiff’s termination on March 31, 2023, but reversed it for the subsequent period.
The non-competition clause resulting from the employment relationship pursuant to Art. 60 (1) HGB and Art. 241 (2) BGB (German Civil Code) applied for the entire duration of the employment relationship.
- This obligation also applied during unfair dismissal proceedings, at least if the dismissal was obviously ineffective or the plaintiff had prevailed in the first instance.
- In other cases, if the dismissal is not obviously ineffective and if there is no judgment in the unfair dismissal proceedings upholding the claim, a claim for injunctive relief only exists in exceptional cases if the interests have been weighed in favor of the employer.
- The obligation to refrain from competition did not apply if the dismissal was obviously effective. In this respect, the LAG refers back to the German Federal Labor Court’s case law on the general right to continued employment.
In the disputed case, this means that the defendant was initially obliged to refrain from competition due to the action for unfair dismissal in his favor. Since he did not comply with this obligation, the further termination of March 31, 2023 was obviously effective, so that the initial obligation to refrain from competition ended at the end of that day.
Note
The LAG’s view is convincing.
The parties are behaving contradictorily. On the one hand, the employer dismisses its employee, but on the other hand demands compliance with the non-competition clause. The employee, for his part, sues for the continuation of the employment relationship, but at the same time competes with the employer.
Therefore, each case always requires a weighing of interests, which is essentially based on an assessment of the termination’s effectiveness.
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