WRITTEN QUESTION E-1637/02

by Riitta Myller (PSE) to the Commission

(10 June 2002)

Subject: Non-competition agreements and freedom of movement

The purpose of an agreement prohibiting competition between an employer and an employee is to protect the employer's knowledge and know-how relating to product development, research and similar matters from competitors and to ensure that the interests of employer and employee are respected, in a more impartial manner.

However, such agreements are now widely used for work in respect of which there is no need to protect the employee's position, his duties or information required for the employing firm's activities. They are often valid for a long period and often contain severe penalty clauses to ensure compliance. The agreements also often impose unreasonable demands and conflict with the Community law principle of proportionality.

Agreements prohibiting competition restrict the employee's right to move into the service of another employer, and hinder freedom of movement, since the employee is unable to found his own firm in the same area. They thus impede in a general way the free movement of workers and services from one Member State to another. National legislation on the admissibility of such agreements varies considerably within the EU. The restrictions imposed by agreements prohibiting competition therefore mean that workers in the Member States have differing attitudes towards moving between Member States for job application purposes and to work. This leads to inequalities between workers from different Member States.

What measures does the Commission propose to take to harmonise the provisions of agreements prohibiting competition and to correct the above-mentioned undesirable state of affairs?

Answer given by Mr Monti on behalf of the Commission

(11 July 2002)

There is no European legislation dealing specifically with non-competition clauses between employer and employee after the end of their contract. The Commission has no plans to make proposals for legislation in this respect.

The vast majority of the clauses referred to by the Honourable Member cover employers and employees within a Member State. In that case the Community rules on the free movement of workers and services do not apply. These clauses concern primarily contract law issues which are governed by Member States' law. However, it is obvious that any restrictions, for example those resulting from the differences in national legislation, may have cross-border consequences. The issue of whether a particular clause is compatible with the Community rules on free movement of workers under Article 39 of the EC Treaty and/or the freedom to provide services under Article 49 of the EC Treaty should be examined on a case-by-case basis.

As regards free movement of workers, it is important that a balance exists, on the one hand, between the fundamental rights of a worker to work and to exercise his right to free movement and, on the other hand, the right of the employer to protect his legitimate interests against competitors. When such a balance exists and the clause is proportionate to its aim and does not unnecessarily limit the right of the worker to free movement, the clause seems not to be contrary to the provisions of free movement for workers within the Community. In this respect, reference should be made to the case-law of the European Court of Justice in the Bosman-case(1) in which the Court held that measures which constitute obstacles to the free movement of workers would not be contrary to Community law if they pursued a legitimate aim compatible with the EC Treaty and were justified by pressing reasons of public interest and, moreover, were in line with the principle of proportionality.

A particular clause which has a disproportionate effect on a person's ability to seek employment may well amount to a barrier to the provision of services under Article 49 of the EC Treaty as well (e.g. in the case where a company which operates in the high-tech sector needs to recruit a highly qualified person to be able to provide its services). Any rules that may hinder or make less attractive

the exercise of a fundamental freedom guaranteed by the EC Treaty, such as the freedom to provide services must, according to the established case-law of the Court of Justice, fulfil certain requirements(2). There are four such requirements: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it.

It is for the national authorities to apply the said criteria in individual cases and the question of the compatibility or otherwise of an agreement with the said criteria is a matter for the national courts to assess in the light of Community rules and principles on free movement of workers and services.

As regards the competition rules of the EC Treaty, the agreements mentioned by the Honourable Member would fall under these only in very exceptional cases, provided that they constitute an implementation of an agreement between undertakings. These rare cases would be addressed by the Commission individually.

(1) Case C-415/93, Bosman, ECR 1995, page I-4921.

(2) See, for example, case C-55/94, Gebhard, ECR 1995, I-4165.