Prohibition of Parallel Employment

According to the amendment to the Labor Code, which came into force on April 26, 2023, an employer may not prohibit an employee from concurrently remaining in an employment relationship with another employer or from concurrently remaining in a legal relationship that forms the basis for the provision of work other than an employment relationship, e.g., a contract for the provision of services. There are two exceptions to this prohibition. First, when employees enter into non-compete agreements, employers can only restrict employment with competing entities, not others. Second, specific legislation may provide for the prohibition of parallel employment. An example of such specific provisions is the Drivers’ Working Time Act, according to which an employer may prohibit a driver from concurrently remaining in an employment relationship with another employer if this is justified for reasons of safety.

In addition, a provision has been introduced into the Labor Code prohibiting unfavorable treatment of an employee who is employed with another entity. Parallel employment, unless non-competition and restrictions in this respect under specific legislation apply, cannot constitute grounds for termination of the employment contract or a reason justifying preparation for such termination. Other actions having an equivalent effect to a termination of employment are also prohibited. Such an equivalent action is failing to conclude another contract after the termination of a previous fixed-term if the reason for not concluding a new contract is parallel employment. If the employee believes that the reason for terminating the probationary contract or not concluding another contract of employment was parallel employment, they may, within seven days, submit a request to the employer to indicate the reason justifying the termination of the contract of employment. The employer must give the employee a response to such a request within seven days.

Until the amendment of the Labor Code in April 2023, the legislation did not provide for a prohibition of parallel employment. It was considered that the restriction of the employee’s freedom to take up additional employment to the extent that it does not constitute a competitive activity towards the employer is permissible if it is justified by the employee’s position, the employer’s real interest, and the duty to care for the employer’s interests, in particular by the desire to avoid potential conflicts of interest, and the employee receives adequate remuneration compensating for such restriction. This position was also confirmed in case law.

Following the introduction of the ban on parallel employment, employers more often opt to conclude a non-compete agreement during employment to at least partially limit additional employee activity. Such a solution does not eliminate the additional employment of an employee in an entity that is not a competitor of the employer, and the employee’s additional activity violates or may violate the employer’s interest and expose it to harm. However, the prohibition of parallel employment does not exclude the employee’s duty to care for the employer’s interests, including the avoidance of conflicts of interest or loyalty to the employer and the duty to keep confidential information, the disclosure of which could expose the employer to harm. Thus, despite the existence of the prohibition on parallel employment, the employee is still obliged to refrain from actions that may violate the employment duties and harm the employer’s interests.

A solution proposed by some practitioners is to include paid prohibitions in employment contracts to undertake additional employment related to the actual interests of the employer. Such a prohibition is not unilaterally imposed by the employer but agreed upon by the parties. In addition, the restriction of the employee’s right to undertake additional employment is compensated by adequate remuneration. If a breach of the contractually agreed restriction to undertake additional employment were to occur, the employer could apply sanctions in the form of termination – not because of the parallel employment, but because of the breach of contractual obligations. Time will tell whether such a solution will be accepted by the courts.

Employers should review the model employment contracts and internal regulations used, if this has not already been done, and consider entering into non-compete agreements for the duration of the employment relationship, as well as train employees and remind them of their obligations toward the employer, in particular the duty to care for the interests of the employer.

By Agnieszka Nowak-Blaszczak, Counsel and Employment Lead, Wolf Theiss

This article was originally published in Issue 10.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.