Non-compete agreement
A contractual non-competition agreement exists when the employer and the employee agree that for a certain period after the termination of the employment contract, the employee may not be employed by another person who is in market competition with the employer, and that he may not, for his own account or for the account of a third party, enter into business with which he competes with the employer. It must be concluded in writing and cannot last longer than two years from the date of termination of the employment relationship.
It does not bind the employee if the purpose of the ban is not to protect the legitimate business interests of the employer, or if it disproportionately restricts the work and advancement of the employee, given the area, time and goal, and in relation to the legitimate business interests of the employer. Also, it is void if the contract is concluded by a minor or a worker who, at the time of concluding the contract, receives a salary lower than the average salary in the Republic of Croatia.
If the employee cancels the employment contract with extraordinary notice because the employer has seriously violated the obligation from the employment contract, the ban ceases to be valid if, within one month from the termination of the employment contract, the employee declares in writing that he is not considered bound by that agreement. Also, the non-competition agreement ceases to be valid when the employer cancels the employment contract, and there is no valid reason for doing so, unless he informs the employee within fifteen days of the termination of the contract that he will be paid compensation for the duration of the contractual non-competition agreement.
Compensation
A contractual non-competition agreement binds the employee only if the employer has contractually assumed the obligation to pay the employee compensation for the duration of the non-competition agreement at least in the amount of half of the average salary paid to the employee in the three months before the termination of the employment contract.
However, if the employer does not assume the obligation to pay compensation for the duration of the contractual non-competition agreement, he can include a contractual penalty for non-compliance with the non-competition agreement only if, at the time of entering into such an agreement, the worker received a salary higher than the average salary in the Republic of Croatia.
Contract penalty
As previously pointed out, in case of non-compliance with the contractual non-competition agreement, a contractual penalty can be agreed.
If only a contractual penalty is provided for non-compliance with the non-competition agreement, the employer can, in accordance with the general regulations of compulsory law, request only the payment of that penalty, and not the fulfilment of the obligation or the compensation of greater damages.