How the Validity of Non-Compete Clauses in Employment Contracts Is Determined in Greece

Post-contractual non-compete clauses are aimed at protecting the employer’s legitimate professional interests. However, it cannot be overlooked that the clauses in question significantly impede the employee’s professional activity and development and constitute a direct and substantial restriction on the employee’s professional freedom.

In Greece, there are no special legislative provisions limiting the conclusion of such clauses. Therefore, the protection of the employee against contractual clauses limiting their professional freedom ‒ for example, competition clauses and confidentiality clauses ‒ is provided through the general clauses of civil law that set limits to private autonomy (Articles 178, 179, 281 of the Greek Civil Code).

It is notable that, in the case law, Articles 178 and 179 of the Greek Civil Code are applied as the legislative basis for the judicial review of non-competition and confidentiality clauses in employment contracts ‒ as opposed to Article 281 of the Greek Civil Code. However, recently, judgment No 830/2024 of the Supreme Court of Greece (Areios Pagos) was issued. This ruled on the legality of a contractual employment clause that provided that, in the event of the employee’s voluntary exit from the company before the expiry of a certain period, the employee is obligated to pay their employer the amount that the latter has spent on the employee’s training.

In the above-mentioned decision, the Supreme Court ruled that ‒ even if the relevant clause is not invalid under Articles 178‒179 of the Greek Civil Code (ie, it does not contain an excessive restriction on the employee’s freedom and it is not in general contrary to moral rules) ‒ Article 281 CC applies. This means that the clause may be held to be invalid as unfair because, given the contractual inequality of the contracting parties, it infringes the principles of proportionality and the prohibition of the abuse of rights. Judgment No 830/2024 therefore makes a decisive contribution to the judicial review of dependent employment contracts and opens the way to reviewing the legality of their terms (including non-compete clauses), in light of proportionality and the prohibition of abuse of rights, as per Article 281 of the Greek Civil Code.

The criteria for assessing non-compete clauses in employment contracts are as follows.

Given that a non-compete clause entails a direct and substantial restriction on the professional freedom of the employee, such clause should be supported by a specific justification in order to be considered valid.

It is necessary to assess whether and to what extent the employee is able to damage the financial interests of the employer by engaging in a competitive activity after their exit from the company, so that ‒ upon balancing the conflicting interests ‒ the employee’s interests linked to their career and development are set back in favour of the employer’s interest. If it is not ascertained that the clause is intended to protect the employer’s legitimate interests, the clause is therefore invalid and there is no need to examine whether there are other conditions supporting the legality of the clause.

As the clause in question aims at protecting the employer from professional damage that may arise from potential future competitive activity of the employee, this should be reflected in the clause. General risks for the employer are not sufficient ‒ rather, it is required that the clause provides for specific risks arising from the employee’s activity, which the employer has a legitimate business interest in avoiding.

The employer has a legitimate interest when an employee has acquired special knowledge and skills while engaged by the employer in a particular field of activity and, by making use of the exact knowledge and skills in question, is able to competitively harm the employer in the future. The same applies where the non-compete clause is intended to protect professional secrets that have come to the employee’s knowledge and, by means of such clause, the employer seeks to prevent the risk of damage to their legitimate interests should these secrets are disclosed.

The duration and the geographical scope of the prohibition should not exceed what is necessary to safeguard the employer’s legitimate professional interests. As a rule, the reasonable period of validity ranges from one to a maximum of two years. The geographical scope of the prohibition should be limited to where the employee is genuinely able to compete with their former employer.

Non-compete clauses that do not provide such limitations must be considered invalid because they practically force the employee to give up their profession.

In the context of balancing the conflicting interests of the parties in good faith, the decisive criterion is whether a reasonable “compensation” for the employee is granted under the non-compete clause. A post-contractual non-compete clause cannot be regarded as valid if the employee’s commitment to refrain from competitive activity is not compensated by the employer through a “reasonable consideration”.

The provision of a certain financial consideration as a condition for the validity of the non-compete clause protects the employee’s professional freedom, which could be restricted by the employer without there actually being a justified professional interest on the latter’s part. Furthermore, the compensation comprises the consideration paid by the employee for the employee’s undertaking to refrain from a certain activity for the benefit of the employer.

For a non-compete clause to be valid, it is required that the prohibited competitive acts are limited to the maximum extent possible, in such a way that the activity that the employee is prohibited from undertaking is defined as being in competition with that of their previous employer. Thus, according to judgment No 1546/2022 of the Thessaloniki Court of Appeal, the use of the phrase “in similar undertakings” limits to the maximum extent possible the undertakings that are regarded as competitive and also limits the scope of the prohibited competitive acts to the employer’s object of activity.