restrictive covenant
noun · nachvertragliches Wettbewerbsverbot
Nachvertragliches Wettbewerbsverbot for a post-termination restrictive covenant, and the trap is that it costs the employer money to bind at all, § 74 Abs. 2 HGB requires a Karenzentschädigung of at least half the last pay for each year of the restraint. Draft the covenant the English way, with no compensation clause, and on the prevailing view it is void, the employee simply free to compete.
Which translation, when
Why
A restrictive covenant that survives the end of employment is a nachvertragliches Wettbewerbsverbot, and German law attaches a condition English drafting never budgets for. Under § 74 Abs. 2 HGB the restraint binds only if the employer undertakes to pay a Karenzentschädigung, compensation of at least half the employee’s last contractual remuneration for each year of the ban. A covenant drafted the English way, reasonable in scope but with no compensation clause at all, does not bind, and on the prevailing view it is void, so the employee is simply free to compete with nothing to claim. The election an English lawyer might expect belongs to a different case, where compensation is promised but falls short of the statutory half, and there the covenant is not void but unverbindlich, the employee choosing whether to observe it and take the money or to ignore it. The covenant also needs the written form and a signed copy for the employee, § 74 Abs. 1 HGB, must protect a berechtigtes geschäftliches Interesse, and cannot exceed two years, § 74a Abs. 1 HGB. The reasonableness test familiar from English law is not the German gate, the money is, so the reflex Wettbewerbsverbot alone is incomplete, the post-contractual restraint lives or dies on the Karenzentschädigung the English covenant does not mention.
Typical mistakes
- A post-termination non-compete with no Karenzentschädigung clause does not bind, § 74 Abs. 2 HGB, and on the prevailing view is void, so a restrictive covenant drafted the English way leaves the employee free to compete with nothing to claim.
- The restraint cannot exceed two years and needs the written form with a signed copy, § 74 Abs. 1, § 74a Abs. 1 HGB, so an indefinite or loosely agreed covenant fails on form or duration.
- The English reasonableness test is not the German gate, so pleading that a restraint is reasonable in scope does not save a covenant that omits the statutory compensation.
What matters
Departure and non-compete clauses meet a price tag: a nachvertragliches Wettbewerbsverbot binds only if the employer promises Karenzentschädigung of at least half the last pay per year, § 74 Abs. 2 HGB, capped at two years. The covenant lifted from an English template, tight in scope but paying nothing, does not restrain the departing employee at all.
What the machine misses
Restrictive covenant comes back as beschränkende Vereinbarung or a bare Wettbewerbsverbot in machine output, and both miss the condition that decides everything, a nachvertragliches Wettbewerbsverbot binds only against Karenzentschädigung, § 74 Abs. 2 HGB, at least half the last pay for each year. So a covenant translated word for word reads as enforceable on its reasonable terms, the English test, when German law gives the covenant no binding force until the employer promises to pay for the restraint.
Examples
| a post-termination restrictive covenant | ein nachvertragliches Wettbewerbsverbot |
| the covenant does not bind | das Wettbewerbsverbot ist unverbindlich |
| compensation for the restraint | die Karenzentschädigung |
| a two-year non-compete | ein zweijähriges Wettbewerbsverbot |