In the context of employment relationships, the non-competition clause is an essential tool for protecting the legal and economic interests of the parties involved. According to Law No. 53/2003 – the Labor Code, as updated, this represents an optional specific clause in the individual employment contract.
Thus, the non-competition clause imposes on the employee the obligation not to engage in an activity that competes with that of their employer after the termination of their contract. In exchange for this abstention, the employer is obliged to pay the employee a non-competition indemnity throughout the non-competition period, for a maximum of 2 years from the date of contract termination.
The non-competition clause is subject to negotiation and can be stipulated both at the conclusion of the contract and during its execution. Additionally, for it to produce legal effects, the individual employment contract must explicitly specify the activities that are prohibited to the employee upon the termination of the contract, the amount of the monthly non-competition indemnity, the period during which the non-competition clause will be in effect, the third parties in favor of whom the activity is prohibited, and the geographical area where the employee can realistically compete with the employer.
The monthly non-competition indemnity that the employer owes to the employee is not considered part of the salary and is subject to negotiation. However, the Labor Code sets a minimum threshold below which it cannot go. The indemnity is at least 50% of the average gross salary income of the employee in the last 6 months prior to the termination date of the individual employment contract or, if the duration of the individual employment contract was less than 6 months, the average gross monthly salary income earned during the contract period. For the employer, this represents an expense, being deductible when calculating taxable profit and taxed to the individual beneficiary under the law. From a tax perspective, the non-competition indemnity is classified as income similar to salaries, thus a 10% income tax is applied. Additionally, according to the Fiscal Code, it is included in the monthly calculation base for CASS (social health insurance contributions), being subject to a 10% CASS tax. To declare this indemnity, form 112 must be completed, titled “Declaration regarding the obligations to pay social contributions, income tax, and nominal record of insured persons.”
The non-competition clause cannot absolutely prohibit the employee’s right to work. Its establishment is in favor of the employer; therefore, only the employee can invoke its nullity. The effects of the non-competition clause can be reduced by the court at the request of the employee or the territorial labor inspectorate. Conversely, if the employee breaches the clause with fault, they may be required to return the indemnity and, if applicable, pay damages corresponding to the prejudice caused to the employer.
In conclusion, by stipulating the non-competition clause, a reasonable compromise is sought between the principle of freedom of work and the principles of market economy and fair competition.
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Ana Maria Nistor – Attorney at Law