Shield 4.0 a changes in the ban on competing activities

On June 19, 2020, the Polish legislator adopted the Anti-Crisis Shield 4.0, i.e. the Act on Subsidies to Interest Rates on Bank Loans granted to Entrepreneurs Affected by COVID-19 and on Simplified Procedure for Approval of the Agreement in connection with COVID-19 application.

With a few exceptions, this law enters into force on June 24, 2020.

Shield 4.0 introduces significant changes relating to the ban on conducting competitive activity established on the basis of civil law contracts (agency, commissions, for works and services), as well as labour relations.

Let us remind you that in the provisions of art. 101¹-101⁴ of the Labour Code regulates the prohibition of competition in labour relations. The parties may enter into a separate agreement under which the employee will not be able to carry out activities competitive to the employer’s, or provide employment under an employment relationship or otherwise to an entity carrying out such activities. An employer who has suffered damage as a result of an infringement by an employee of the prohibition of competition laid down in the contract may seek compensation from the employee for that damage.

A ban on competition may also be introduced after the employment relationship has ended. Such an agreement shall then specify the duration of the non-competition ban and the amount of compensation payable by the employer to the employee.

In the case of an agency agreement, the limitation of the competitive activities of the agent after the termination of the agency agreement is regulated in art. 764⁶-746⁸ c.c. The parties may, on pain of nullity, restrict in writing the agent’s competitive activities for the period after the termination of the agency agreement. A restriction is valid if it concerns a group of customers or geographical area covered by the agent’s activities and the type of goods or services covered by the contract. A restriction on competitive activity may not be reserved for a period exceeding two years from the termination of the contract. The principal is obliged to pay the agent an appropriate sum of money for the restriction of competitive activity during its duration, unless otherwise specified in the agreement or unless the agency agreement is terminated due to circumstances for which the agent is responsible.

On the other hand, in the case of a contract of mandate, a service contract and a work contract, the Civil Code does not contain any specific provisions relating to the prohibition of competition, leaving the regulation of this matter to the principle of contractual freedom. Thus, within the limits of art. 353¹ c.c. The parties are free to determine the duration of the non-competition clause, including after termination of the agreement, the rules for terminating the non-competition clause, or the amount of compensation.

In view of the above, it should be noted that Shield 4.0 introduces into the Act on special arrangements for the prevention, prevention and combating of COVID-19, other infectious diseases and the crisis situations caused by them of March 2, 2020 the provision of art. 15gf according to which, during the period of an emergency or epidemic declared due to COVID-19, the parties to the non-competition agreement are prohibited from competing after the termination:

1. the employment relationship,
2. the agency contract,
3. the contract of mandate,
4. another contract for the provision of services to which, in accordance with the act of April 23, 1964 – Civil Code, the provisions relating to the mandate apply,
5. contracts for a specific task,

• for which a ban on competitive activity has been established, may be terminated within 7 days.

The above provision of Shield 4.0 materially interferes with the non-competition agreements concluded so far by granting the party for whom the non-competition has been established the statutory right to terminate the non-competition agreement within 7 days.

The above law is independent of the content of the concluded contracts and applies only during the period of an emergency or epidemic declared due to COVID-19.