A non-compete clause in a German employment contract only binds you after you leave if it is in a signed document you were given and your employer promises to pay you, for every year of the ban, at least half of your last pay. It can last two years at most. A clause that promises no payment at all binds neither side.
1. During the job and after it
Two different things are called a non-compete in Germany:
- While you are employed, including the notice period and garden leave, you generally may not compete with your employer. For commercial employees the law says so directly (§ 60(1) HGB); no clause is needed.
- After you leave, you are free to work for a competitor or set up your own business, unless you agreed a post-employment ban (nachvertragliches Wettbewerbsverbot). Employers and employees may agree one, and the rules written for commercial employees in §§ 74 to 75f of the Commercial Code then apply to every employee (§ 110 GewO).
The rest of this guide is about the second kind. These rules are for employees. A managing director of a GmbH is usually not an employee in this sense, and a freelancer's contract is not an employment contract, so their clauses need their own check.
2. When a post-employment ban binds you
- In writing, and handed to you. The ban needs the written form and a document signed by the employer, containing the agreed terms, that is handed to you (§ 74(1) HGB).
- Paid. It is binding only if the employer promises compensation (Karenzentschädigung) for the whole ban that comes, for each year of it, to at least half of the contractual pay you last received (§ 74(2) HGB).
- Two years at most from the end of the employment (§ 74a(1) HGB).
- No wider than needed. It does not bind you as far as it does not protect a legitimate business interest of the employer, or, taking the compensation into account, unfairly holds back your career by its area, length or subject (§ 74a(1) HGB). A ban on "any work in the industry, worldwide" is the kind of clause this is about.
- Void in some cases outright, for example if you were under 18 when you agreed it (§ 74a(2) HGB).
The contract cannot set these rules aside to your disadvantage; an employer cannot rely on terms that do, including tricks to get around the minimum compensation (§ 75d HGB).
3. No compensation, or too little
No compensation at all. The Federal Labour Court has held that a post-employment ban that promises no compensation is void by law, and that a standard severability clause ("if a clause is invalid, a fair rule takes its place") does not rescue it. The employer cannot enforce it, and an employee who keeps to it anyway has no claim to be paid (BAG, 22 March 2017, 10 AZR 448/15).
Some compensation, but less than half. Then the ban is not binding on you (§ 74(2) HGB), which is not the same as void. Whether you can still keep to it and claim the promised money, and what you should tell your employer before you start elsewhere, is worth settling with a lawyer before you decide: the answer depends on the exact wording and on what you do.
4. How the compensation is worked out
- Paid monthly, at the end of each month of the ban (§ 74b(1) HGB).
- Bonus and commission count. Variable pay is included at its average over the last three years (or over the time the pay rule existed, if shorter); expense refunds are left out (§ 74b(2) and (3) HGB).
- New earnings can reduce it. What you earn elsewhere during the ban, or deliberately fail to earn, is offset as far as compensation plus earnings would exceed your last pay by more than a tenth. If the ban forced you to move home, the margin is a quarter (§ 74c(1) HGB). Your former employer can ask you how much you earn (§ 74c(2) HGB).
The arithmetic, with round numbers: someone whose last pay was €6,000 a month and whose compensation is €3,000 takes a job outside the ban paying €5,000. Together that is €8,000; the limit is €6,600 (last pay plus a tenth). The €1,400 above the limit comes off the compensation, leaving €1,600. Real cases also turn on which pay counts and on tax, so treat this only as the method.
5. When your employer gives up the ban
Before the employment ends, your employer can waive the ban by written declaration. You are then free to compete, and the employer stops owing compensation one year after the declaration (§ 75a HGB). A waiver made three months before you leave therefore still costs the employer nine months of compensation. The rule only covers a waiver made before the employment ends.
6. How the job ends matters
- You resign normally. The ban stays as agreed. The resigning guide covers your notice period.
- Your employer dismisses you with ordinary notice: you can free yourself from the ban by declaring in writing, within one month of the dismissal, that you do not consider yourself bound. This does not apply if there was a substantial reason in your person for the dismissal, or if the employer declares with the dismissal that it will pay your full last pay for the length of the ban (§ 75(2) HGB). The dismissal guide explains the separate three-week deadline to challenge the dismissal itself.
- You quit without notice because of your employer's serious breach of contract (§ 626 BGB): the same one-month written declaration frees you (§ 75(1) HGB).
- You sign a termination agreement. Settle the ban in the agreement: whether it stays, and if so that the compensation is provided for. See the termination agreement guide.
7. If you are accused of breaking it
An employer that believes a valid ban is being broken can go to court to stop the competing work, and will usually stop paying compensation for that time. If the contract has a contractual penalty (Vertragsstrafe), the employer can claim it under the rules of the Civil Code, and a disproportionately high penalty can be reduced (§ 75c(1) HGB). A letter demanding that you stop, sign a declaration or pay a penalty usually sets a short deadline; have it read before you answer or sign anything.
8. When a lawyer can help
The moment that matters most is before you accept a new job or start your own business. An employment lawyer can read the clause against these rules, tell you whether it binds you and how far, work out the compensation, handle the one-month declaration after a dismissal, or negotiate a release or a narrower ban with your employer. In the first instance at the labour court each side pays its own lawyer, whoever wins (§ 12a ArbGG), so ask about fees at the start.
Have your contract and every amendment, any separate non-compete document and when you received it, your last payslips and bonus statements, the termination letter or agreement, and the new job offer ready. You can request an English-speaking employment lawyer.
Sources checked on 19 October 2026. The linked provisions are the German statutory text; the explanations here are general information.