New Case Law Involving Competition Restrictions And Court Fees

Previous competition restrictions may be void

The case of Mazeikiu Nafta Trading House concerns the application of the Employment Contracts Act (ECA) to employment contracts agreed before the ECA came into force (i.e before 1 July 2009). According to the facts of this case (No 3-2-1-39-11), the employee was terminated on 20 March 2008 but the competition restriction was to be effective for two years after termination (i.e until 20 March 2010). Subsequently, the employer demanded a penalty payment for the breach of this obligation. The employee claimed that the competition restriction was a standard term and, as such, was unreasonably harmful and invalid. In response, the employer argued that employment contracts are not subject to the regulation of standard term contracts.

On 23 May 2011, the Supreme Court upheld the opinion of the lower courts that employment contracts concluded before and after 1 July 2009 may be subject to the regulation on standard term contracts (although this may not be the case where both parties can influence and negotiate the terms of the employment contract). Furthermore, the Supreme Court noted that employment contracts concluded before 1 July 2009 are subject to the ECA which provides that competition restrictions may only be imposed for up to one year. As the employment contract in question provided for a two year restriction and by 1 July 2009...