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Legal alerts / 2.11.2017

Ministry of Labour gives its opinion on ‘non-compete’ clauses

The Ministry of Labour and Social Security of the Russian Federation (the “Labour Ministry) has confirmed that it will not in future be possible to apply a non-compete clause included in an employment agreement.

In its letter No. 14-2/В-942 dated 19 October 2017, the Labour Ministry has reviewed whether it is lawful for an employer and an employee to enter into a non-compete agreement under which the employee undertakes not to work for any competitors of the employer, not to launch a business competing with the employer as well as to pay a penalty if he or she does not follow such undertaking.

The Labour Ministry has confirmed that Russian labour legislation does not establish any prohibition on:

– an employee working for another employer after the termination of his or her employment agreement if such new employment would have a negative impact on the previous employer, and

– an employee working for another employer carrying out business activities similar to those of his or her former employer.

In view of this, the Labour Ministry considers that, even if a non-compete clause is included in an employment agreement, a clause of this nature will not be applied on the grounds that it contradicts the law and restricts the employee’s rights.

At the same time, the Labour Ministry has additionally confirmed that the parties to an employment agreement are free to include additional confidentiality terms in the employment agreement as an alternative.

We recommend that employers should bear this position of the Labour Ministry in mind in their future business operations.

If the above developments mean that you need advice or other legal assistance, please feel free to contact Borenius Russia. Our team is always happy to help and has the expertise to find the solutions you need.

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