08. Restrictive Covenants

Definition and Types of Restrictive Covenants

During the employment relationship, employees are obliged to respect in respect to employer´s intellectual property, confidentiality and non-compete provisions. There are no specific laws about restrictive covenants after termination of employment. However, the Constitution provides freedom of work, which means that the employee may challenge any non-compete or non-solicitation provisions after termination of employment.

Types of Restrictive Covenants

• Non-Compete Clauses

The employee is obliged by labour laws not to compete with the employer during the labour relationship. Labour Courts have ruled that non-compete provisions after termination are only permissible if they are limited in time (maximum 2 years, in exceptional cases can be exceeded) and compensated (at least 50% of monthly salary, approx.). Failure to follow these requirements will render a non-compete provision null and unenforceable.

• Non-solicitation of customers

The employee is bound during the labour relationship. After termination, it will be analysed as a non-compete provision.

• Non-solicitation of employees

Non-solicitation of employees is unenforceable in Argentina due to the employee´s constitutional right of freedom to work.

Enforcement of Restrictive Covenants – Process and Remedies

Restrictive Covenants, such as non-compete or non-solicitation of customers, after termination of the labour relationship, must comply with specific requirements to be enforceable. The provision should be limited in time (maximum 2 years), compensation (at least 50% of monthly salary approx.) and the geographical and industry/company’s scope must be clearly outlined.

Use and Limitations of Garden Leave

Argentina’s labour laws have no specific provision regarding garden leave. Employers cannot force employees to take garden leave (paid leave), since the employer is obliged to give work to the employee. However, the employee can accept the garden leave, in which case the employee must be paid his salary and benefits in full, as if he was working.