Definition and Types of Restrictive Covenants
The Portuguese Labour Code has a subsection on clauses that limit the freedom of work. These include, among others, provisions on non-competition covenants and minimum permanence duration agreement.
Agreements to restrict the activity of employees during employment or after contract termination are allowed under certain terms and conditions.
Exclusivity clauses during employment are allowed as are non-compete agreement to produce effects after the termination of the contract.
Types of Restrictive Covenants
Non-compete agreements (after termination) are only legal if the activity of the employee is likely to cause harm to the employer and payment of a non-competition compensation amount is agreed and complied with.
As a general rule, the non-competition covenants are subject to a maximum duration period of 2 years. However, if the employee in question was allocated a role involving special trust nature that entails a special relationship with the company or a role that granted the employee access to particularly sensitive information that is relevant for competitors, the duration of the agreement may be increased to up to 3 years.
It is also possible for the employee to agree to a non-termination covenant, by which the employee undertakes not to terminate the contract, subject to a maximum period of 3 years, as a way to compensate the employer for high expenses incurred with the employee’s professional training. The employee may in any case anticipate the end of this period by reimbursing the employer for the relevant expenses incurred.
Although it is common to find companies including non-solicitation covenants in their outsourcing, service provision and joint venture agreements, among others, these restrictive covenants are actually not enforceable under Portuguese labour laws.