The Employee’s Non-Compete and the New Job
Marta worked as a sales manager for a Croatian IT company, TechNovo d.o.o., for five years. Her employment contract included a non-compete clause: for 12 months after termination, she could not work for any competitor in Croatia, and the clause provided no compensation. Marta resigned in January 2024 and, in March 2024, accepted a job with a direct competitor in Zagreb. TechNovo sued to enforce the non-compete and sought damages. Marta argues the clause is void because it lacks compensation and is too broad. Under Croatian labour law, a non-compete clause is valid only if it is limited in time (max 2 years), scope, and territory, and if the employer pays compensation during the restriction period. The contract did not specify any compensation.
1. Is the non-compete clause valid and enforceable against Marta?
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The non-compete clause is likely void. Under the Croatian Labour Act (Zakon o radu), a non-compete clause is valid only if it is in writing, limited to two years, and the employer pays compensation for the entire restriction period. The purpose of compensation is to protect the employee’s livelihood. TechNovo’s clause provides no compensation, so it fails a mandatory condition. The clause is also broad: it covers all of Croatia and any competitor, which may be wider than necessary to protect the employer’s legitimate interests. Even if the clause were partially valid, the lack of compensation makes it unenforceable. The court should declare it void and dismiss the claim for damages. Marta is free to work for the competitor. The employer cannot rely on a clause that it drafted without the required compensation.
2. What factors would a court consider in determining whether the scope and territory are reasonable?
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A court would consider the employer’s legitimate business interest, the employee’s access to confidential information or client relationships, the geographic market in which the employer operates, and the duration of the restriction. TechNovo operates in Croatia, but a nationwide ban may be excessive if Marta’s work was regional. The court would ask whether the restriction is no wider than necessary to protect trade secrets or customer connections. Marta was a sales manager, so client relationships may justify some restriction, but not a blanket ban on all competitors. The court would also consider the employee’s ability to earn a living. Since the clause lacks compensation, the court may not need to reach reasonableness, but if it did, the broad scope would likely be unreasonable. The burden is on the employer to prove the clause is necessary and proportionate.