Employment and Industrial Relations Law

Enforceability of Clauses in Restraint of Trade

02 Sep 2015

2 min read

In terms of clauses in restraint of trade (also known as non-competition clauses), the employee may be prevented from exercising his/her trade or profession after the termination of the employment for whatever reason. Such clauses are often incorporated within contracts of employment, in fact, we are seeing an increase in demand from the employer’s point of view to include non-competition clauses together with a penalty payable by the employee should there be a breach of such a clause.

In view of this, it seems useful to clarify criteria to be fulfilled by employers in order to make non-competition clauses enforceable. Reference has to be made to the Maltese case-law since the Law is not sufficiently clear in this regard.

According to the Maltese case-law (which has made reference to Italian case-law), clauses in restraint of trade have to be interpreted as restrictively as possible. In particular, such clauses can be regarded as enforceable only if they meet the following criteria:

  • they have to be in writing;
  • the employee has to be compensated adequately for respecting a non-competition clause following the termination of the employment;
  • these clauses have also to be certain as regards object, time and place.

Moreover, Maltese judges have stated that if the ex-employee breaches a non-competition clause, the employer needs to prove that a real damage is being incurred in order to receive compensation (resulting from the penalty). Therefore, enforcement of non-competition clauses would only be possible if a real damage is created against the ex-employer and this can be evidenced and quantified.

For further information about how GVZH Advocates can help you with Employment Law and/or Industrial Relations requirements kindly contact us here.