Meaning
Statutory provision within the German legal framework that regulates post-contractual non-compete agreements between employers and commercial agents or employees. Provisions under the german commercial code section 74 demand that any restriction on future employment be accompanied by a financial payment to the individual. Applicability of this rule extends to any agreement that seeks to limit the professional activities of a person after the employment relationship has ended.
Legal Requirement
Mandatory condition for the validity of a restraint of trade clause in an employment contract. The german commercial code section 74 specifies that the employer must provide a written agreement signed by both parties to make the restriction binding.
Financial Compensation
Obligation to pay at least half of the most recent total remuneration for the entire duration of the non-compete period. Compliance with the german commercial code section 74 ensures that the individual is not left without income while the ability to work in a chosen field is restricted by the former employer. This payment includes all components of the salary and regular bonuses.
Geographic Scope
Limitation on the physical area and business sector where the restriction is active. Under the german commercial code section 74, a restriction that is too broad or lasts longer than two years is typically unenforceable in a labor court.
