Definition and Types of Restrictive Covenants
The sole restrictive covenant that is regulated by the Labour Code is the non-compete clause. With this type of clause, the employee shall refrain from engaging in any independent activities, which correspond to those of his/her former employer and which compromise the employer’s interests, following the end of his/her employment.
Types of Restrictive Covenants
The following restrictive covenants are recognised and may be enforceable under the law:
- non-compete clauses;
- non-solicitation of customers;
- non-solicitation of employees.
A non-compete clause must be agreed in writing and included in the employment contract. With this type of clause, the employee shall refrain from engaging in any independent activity, which corresponds to those of his/her former employer and which compromise the employer’s interests following the end of his/her employment. The non-compete clause may only apply to an employee whose salary reaches the legal threshold. Other conditions that have to be respected:
- the employee cannot be a minor when signing the contract;
- the clause cannot be related to a period of time which extends to more than 12 months after the end of the employment contract;
- the scope of the clause must be geographically restricted and never extended outside Luxembourg; and
- the clause must relate to a specific occupational sector and to activities that are at least similar to those of the employer.
Non-solicitation of customers
This clause is valid under Luxembourg law, but the Labour Code does not regulate such clauses.
Non-solicitation of employees
This type of clause may be inserted into an employment contract.