Employment Law2026-10-30

My contract has a non-compete clause with no compensation – am I bound by it?

Your contract bars you from joining the competition after you leave, but mentions no compensation. I explain when such a clause is void and when you can still choose to honour it.

With a move or a resignation on the horizon, you pick up your employment contract once more – and a particular clause gives you pause: for a year or two after you leave, you are not to work for a competitor or set up your own business in the same sector. The contract says nothing about any payment for that period. Which leaves one question: does a clause like this actually bind you at all?

In short

If the contract promises you no compensation for the period after you leave, the post-contractual non-compete clause is void. No obligation arises, and the path to a competitor is open. The position is different where compensation has been agreed but set too low: the restriction is then non-binding, and the choice is yours – you either honour it and claim the statutory minimum compensation, or you disregard it. Because which of these applies often turns on a single phrase, the clause should be examined before you decide anything.

How I can help

I take a close look at your non-compete clause: its form, the level of compensation, its duration and its substantive scope.
I tell you whether the restriction is void, non-binding or valid – and what that means for your next job.
I work out the level of compensation you could claim if you decide to honour the restriction.
If you wish, I handle the correspondence with your (former) employer, for instance where they seek to rely on the restriction.

For an overview of dismissal, termination agreements and the rights that go with them, see the page on employment law.

What a non-compete clause has to satisfy in the first place

A non-compete clause covering the period after employment ends is permissible, but only on several conditions. The relevant rules are §§ 74 ff. HGB; the courts have long applied these provisions to all employees, not only to commercial staff. The restriction binds you only if every single requirement is met:

A written agreement and a separate document. The agreement must be in writing; in addition, the employer must hand you a document, signed by them, setting out the content of the restriction (§ 74 (1) HGB). An email or a verbal understanding will not do.
A promise of compensation (Karenzentschädigung). The employer must undertake to pay compensation for the duration of the restriction. The statutory minimum, for each year of the restriction, is half of your last contractual remuneration (§ 74 (2) HGB). Alongside basic salary, that includes everything you regularly received as well – commission, say, bonuses, or a company car available for private use.
A legitimate business interest. The restriction may limit you only as far as the employer has a genuine business interest in it, for instance in client relationships or trade secrets. Where it goes further, or hampers your professional progress unreasonably, it is non-binding to that extent (§ 74a (1) HGB).
Two years at most. A non-compete clause may not extend beyond two years from the end of the employment relationship (§ 74a (1) HGB). For any period beyond that, there is no obligation.

The consequence of a defect varies. Where no compensation is promised at all, the restriction is void. Where a promise exists but falls short of the minimum, or where the restriction is drawn too widely, it is merely non-binding. This distinction has significant consequences for you – hence the next section.

Missing or insufficient compensation: void or merely non-binding?

For your question, the wording of the contract is decisive:

The contract is silent on compensation. If the contract contains no promise of any payment for the restricted period, the restriction is void from the outset. The Federal Labour Court (Bundesarbeitsgericht) has taken this view even where the contract includes a severability clause: such a clause cannot make good a missing promise of compensation. No statement, no notice and no withdrawal is required of you – you can join a competitor straight away. The other side of the coin: because the restriction does not exist in law, there is no compensation either, even if you hold back of your own accord.
There is a promise, but it falls below half. Where the contract provides for compensation below the statutory minimum, the restriction is non-binding. The choice is then yours: either you honour it and claim the full statutory minimum compensation, or you disregard it and receive nothing. You must make up your mind at the start of the restricted period, and you are bound by that choice thereafter. Doing both at once – claiming compensation and joining the competition – is not an option.
The compensation is right, but the scope or duration is excessive. Here the restriction is non-binding only in so far as it exceeds the employer’s legitimate interest or the two-year limit. Its core remains valid and must be observed to that extent.

Which of these three situations applies to you often turns on a single sentence in the contract. That is precisely why the review belongs before the decision, not after it.

Set-off: what reduces the compensation?

Anyone who honours a valid restriction and receives compensation for it must allow a deduction for what they earn elsewhere during that time – for instance in a new post outside the field of competition (§ 74c HGB). In detail:

What falls to be set off is the earnings you actually obtain by putting your working capacity to use, together with those you decline in bad faith.
Set-off only begins once the compensation and your new earnings together exceed 110 per cent of your former contractual remuneration. Below that threshold you keep both in full.
Where the restriction made a move of home necessary, the threshold rises to 125 per cent.
The employer may require information about the level of your earnings.

Can the employer simply drop the restriction?

Yes – but only while the employment relationship still exists. Up to the point it ends, the employer may unilaterally waive the non-compete clause in writing (§ 75a HGB). This waiver cuts both ways for you: once it is declared, you are free and may join a competitor. The employer, however, is only released from the obligation to pay one year after the declaration. So if they declare the waiver shortly before you leave, they remain liable to pay compensation until the end of that year, even though your obligation fell away long before. Once the employment relationship has ended, this route is no longer open to them.

A typical case from practice

Reading through her contract, a sales employee comes across a non-compete clause that covers the entire sector for two years. As compensation, the contract names one third of her last basic salary; of the commission that makes up a large part of her income, there is no mention. She now has a job offer from a direct competitor and does not know whether she can accept. The review shows that the promised sum falls clearly short of half her last remuneration – all the more so once the commission is brought in, as it should be. The restriction is therefore non-binding. She can take the job, and by doing so gives up the compensation. Equally, she could honour the restriction and claim the statutory minimum compensation based on both basic salary and commission. Which works out better for her depends on the competitor’s offer.

Common mistakes

Moving on without having the clause reviewed. Those who go on gut instinct – where the restriction turns out to be valid – face a contractual penalty, an injunction, or claims for damages.
Being deterred by the mere existence of the clause. A good many restrictions come from old templates, or ones adopted unchecked, and are void for want of a compensation promise or non-binding because the sum promised is too low.
Making the choice too late, or inconsistently. Where compensation is agreed but too low, the decision must be made at the start of the restricted period. Anyone who works for a competitor and then claims compensation after the fact is in a poor position.
Ignoring the duty to provide information. Those who withhold the requested information about their new earnings from the former employer put their own claim to compensation at risk.

If a resignation or your next career step is on the cards in any event, dismissal and the non-compete clause should be looked at together – you will find first steps under Received notice of dismissal – first steps.

Frequently asked questions

Can I start with a competitor straight away if the contract names no compensation at all?

Yes. If the contract contains no promise of any payment for the duration of the restriction, the clause has no effect. No statement on your part is needed; you can take up the new post as though the clause were not in the contract.

What if the contract does name compensation, but I don’t know whether it’s high enough?

Then set the promised sum against half of your last contractual remuneration – recurring additional benefits count too. If the promise falls below that figure, the choice is yours: honour the restriction and claim the statutory minimum compensation, or set the restriction aside.

Can my employer sue me despite a void restriction?

A claim is something they can bring at any time; it is simply that a claim founded on a void clause does not, as a rule, succeed – neither for an injunction nor for a contractual penalty. The real question is whether your clause is in fact void. That question belongs before the move, not after it.

Does the non-compete clause still apply if I resigned myself?

In principle, yes. For the validity of the clause it makes no difference which side brought the employment to an end; all that matters is whether the clause meets the statutory requirements.

Do I have to disclose my new earnings to my old employer?

If you draw compensation because you are honouring a valid restriction, you owe the former employer, on request, information about your other earnings. What you earn there may be set off against the compensation.

Your next step

Whether the non-compete clause in your contract binds you is something that should be settled before you accept a new post or resign. Send me your employment contract – I will look at the clause and tell you what applies to you and what does not. I advise clients throughout Germany, by video or by telephone.

This article provides general information and is no substitute for legal advice in an individual case. Last updated: 2026-10-30.

Christian Czirnich, Rechtsanwalt (attorney at law), Kirchseeon near Munich

Tell me what the non-compete clause in your contract says – I will take a look.

I read every message myself and usually reply on the next working day. What you write to me is covered by legal professional privilege from the first word, even if no engagement comes about. The initial assessment is free of charge.