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Non-compete agreements are increasingly used in employment contracts, especially in high-skill sectors like private banking. As is well known, these clauses bind the employee not to engage in competing business activities after the termination of employment. For such an agreement to be valid, the law requires the employer to provide compensation that is proportionate and either determined or at least objectively determinable. But is it lawful to pay this compensation during the employment relationship? Recent rulings from the Italian Supreme Court have clarified several key aspects.
Orders no. 9256 and 9258/2025: two parallel cases
Orders no. 9256 and 9258, both issued on April 8, 2025 by the Labor Division of the Supreme Court, address two similar cases involving former employees of the same bank. These employees had signed non-compete agreements where the compensation was paid in installments during employment. Upon resignation, the bank accused them of violating the agreement and sought damages, while the employees argued the clause was invalid due to inadequate compensation.
In the first case (Order 9256), the Milan Court of Appeal found the agreement void, reasoning that the agreed compensation—€10,000 per year for three years—was tied to the actual duration of the employment relationship and thus could not be determined in advance in the event of early termination. Moreover, a clause stipulated that if the employee’s duties changed, their obligation under the non-compete agreement would remain, while the employer’s payment obligation would cease, creating an unfair imbalance.
Autonomy of the agreement and ex ante evaluation
The Supreme Court partially upheld the employer’s appeal, emphasizing a key principle: the non-compete agreement is a legally autonomous contract and must be assessed on its own terms. The compensation is not part of the employee’s salary but a specific payment in return for the obligation not to compete after leaving the company. For this reason, compensation may lawfully be paid during employment, provided that it is objectively determinable from the start and proportionate to the restriction imposed .
The second case: Order 9258 and the confusion between form and substance
Similarly, Order 9258 examined a non-compete clause lasting twenty months, with compensation of €12,000 per year paid during the employment relationship. The Milan Court of Appeal once again declared the clause void, claiming the compensation depended on the actual duration of employment and lacked a guaranteed minimum. Additionally, the agreement included a clause ending the employer’s payment obligation in the event of a change in the employee’s job duties, while maintaining the non-compete obligation on the employee’s side.
Two distinct flaws: the Court requires a double assessment
The Supreme Court overturned the lower ruling, stressing that indeterminability and disproportionality are two distinct grounds for invalidity: the first concerns the legal structure of the contract (Article 1346 of the Civil Code), while the second concerns the adequacy of compensation relative to the burden placed on the worker (Article 2125 of the Civil Code). Mixing these two elements, as the lower court had done, prevents a correct legal evaluation. The appeals court must therefore assess separately whether the compensation was objectively determinable and whether it was fair, based solely on the contractual clauses as signed, without being influenced by later developments or the timing of payment .
Absolute nullity and indivisible clauses
In both rulings, the Supreme Court rejected the idea that a non-compete clause can be declared void in abstract terms, without a thorough review of the agreement’s substance. Furthermore, it ruled out the possibility of a “partial preservation” of the clause: if the compensation is invalid, the entire non-compete agreement falls with it.
Bottom line: lawful payment, but only if certain and proportionate
Together, these two rulings send a clear and powerful message: compensation for a non-compete agreement can be validly paid during employment, as long as it meets the substantive requirements of being determinable and proportionate. At the same time, they reaffirm the legal autonomy of the non-compete agreement and the employee’s right to real, fair, and balanced compensation for the professional restrictions accepted.
