Ban on competition for music teachers
An example from the practice of the legal advisor of the Swiss Society for Music Pedagogy SSPM: Yvette Kovacs, Doctor of Law, SSPM legal advisor and attorney-at-law in Zurich, answers questions from SSPM members.
1. Problem statement
Question from an SSPM member: My music school recently started offering adult education. It has sent a letter of dismissal to all teaching staff and invited them to sign a new contract stipulating that they are no longer allowed to teach music privately in the area served by the music school. It is specified that this ban on competition can be lifted in exceptional cases, if the teachers announce the students concerned and request the corresponding authorization.
Question from another SSPM member: Shortly after resigning from a music school, a teacher received a letter from the director stating that his students were to remain at the music school. The teacher was asked to confirm this with his signature and return the signed letter to the principal.
2. Prohibition of competition during the term of the contract
Basis : For the duration of the employment relationship, the employee is subject to a duty of care and loyalty pursuant to art. 321a CO (Swiss Code of Obligations). This stipulates in particular that, during the term of the contract, the employee must not perform paid work for a third party insofar as this violates his duty of loyalty and, in particular, competes with the employer. Competition exists when equivalent services are offered which meet the same customer needs and concern at least the same part of the customer base. This principle applies entirely to full-time employees. Those working part-time are often obliged, for financial reasons, to be able to carry out another activity. When the employee and employer agree to a part-time position, they tacitly accept that the employee will carry out complementary ancillary activities, particularly in his or her usual field of activity, and that the prohibition on competition is thus removed. This presumption of tacit consent on the part of the employer is only valid, however, if no conflict of interest arises between the various part-time jobs, and if the duty of loyalty as defined by labor law remains guaranteed. In addition, the parties may expressly agree that a competing ancillary activity is prohibited. In practice, a complete ban on any further part-time work is often replaced by regulations stipulating that part-time work in other, competing activities is only permitted with the prior written consent of the employer.
Answer to the first question: In principle, an employer is legally entitled to conclude contracts only on condition that the teachers are not engaged in competing activities, either privately or at another music school. Music schools are also permitted to give notice of "termination-modification", i.e. to terminate an employee's employment in due form and time, and then ask the employees concerned to enter into a new contract including a non-competition clause. Similarly, music schools are not legally prohibited from providing for an obligation to announce and approve such competing activities, instead of a complete ban. The music school's procedure is therefore legally correct.
For workers who receive such an offer from their employer, the following points need to be clarified:
- on a formal level: is it really a competing activity?
If the music school teaches exclusively to children/young people or exclusively to adults, private tuition or tuition at another school is only considered as competing if it is aimed at the same groups of pupils.
- geographically: does the competing activity actually take place in the area served by the music school?
Teachers only compete with the music school if they teach the same groups of pupils, i.e. if the pupils they teach would have attended the music school if they hadn't been teaching. Consequently, it is important in such regulations that the area served by the music school is closely defined, and that the private activity is carried out somewhat outside this area.
- In terms of content: does the music school offer the specific instrument or branch taught by the music teacher?
Teachers who privately teach instruments or disciplines other than those offered by the music school are not in competition with it, and can therefore continue to teach without further ado.
It is always dangerous to violate the duty of loyalty inherent in the employment contract, and in particular the prohibition on competition, as in judicial practice such cases have regularly led to immediate dismissal.
3. Prohibition of competition after termination of contract
Grounds: The legal prohibition on competition under art. 321 a CO ends with the termination of the employment contract. It follows that, after termination, an employee may in principle immediately engage in another activity in competition with the former employer, whether privately or with another employer. It is irrelevant whether, depending on the circumstances, the employee who leaves his employer takes with him considerable knowledge acquired during his previous employment and puts it to work for the new employer or uses it for his own benefit.
The only way to avoid this situation is for the employer and employee to agree a non-competition clause after the end of the contract (art. 340 ff, CO). However, this is only binding in a very limited context. In particular, the employee must have acquired knowledge of the employer's clientele or manufacturing or business secrets during the employment relationship, and the use of this information must be such as to cause the employer appreciable prejudice. In addition, the prohibition of competition after the end of the contract must be agreed in writing, otherwise it is invalid. Oral or e-mail agreements are not sufficient. Furthermore, the prohibition must be appropriately limited in terms of place, time and type of business, and may only exceed three years in very special circumstances. Excessive bans on competition cannot be imposed by judicial means, and are limited accordingly or annulled by the judge. The following principles therefore apply to music teachers:
- There is no automatic ban on competition after the end of the contract.
- After the end of the contract, teachers are free to decide whether they wish to work in other music schools and/or as private tutors.
- There is no obligation to enter into a prohibition of competition agreement.
- A prohibition of competition is only valid in writing, i.e. it must be signed by hand or with a certified signature.
- A ban on competition must be clearly and narrowly delimited as to location, its duration may not exceed three years, and it must be restricted to the activity carried out at the music school.
Even if all these requirements are met when a non-competition clause is entered into, there is a good chance that the prohibition on competition after the end of the contract will be deemed invalid. This is for the following reasons:
- The prohibition of competition is only valid if the employment relationship enables the employee to gain knowledge of the employer's clientele or manufacturing or business secrets, and if the use of this information is likely to cause the employer appreciable harm (art. 340, para. 2, CO). According to consistent doctrine and case law, it is not possible to assert a prohibition of competition when the link to customers is primarily based on the employee's particular abilities and personal skills, and his relationship with customers is mainly of a personal nature. In this case, customers do not stay with the worker because of the knowledge he has acquired with the employer, but because of his personal qualities and skill. After the end of the contract, the worker does not use the skills he has acquired with the employer, but his personal characteristics, which cannot be prohibited by a prohibition on competition. Case law has confirmed this in the case of gymnastics and dance teachers, a ladies' hairdresser, a riding instructor and, in the canton of Geneva, a piano teacher.
What all these professions have in common is that an employee's performance and success depend above all on his or her personal qualities, and not on the employer's knowledge and offerings. These personal qualities are in themselves decisive with regard to a possible change of clientele, and the more creatively and freely the employee can act, the more reason to presume that this is the case (judgment of 4.3.2008 by the Zurich Supreme Court, ATF 130III353 ff and ATF 138III67 ff). There is therefore a good chance that a ban on competition after the end of the contract, even if valid on the face of it, will not be protected by a court on this basis, and that the employee will be able to work freely after the end of the contract, whether privately or as an employee, even if he is in competition with his previous employer.
The prohibition on competing ceases when the employee can prove one of the following:
- if it is established that the employer no longer has a real interest in maintaining the ban (he ceases his activity or no longer offers the discipline in question);
- if the employer terminates the contract without justifiable reason attributable to the employee;
- if the employee terminates the contract for a justified reason attributable to the employer.
It is important to always clarify the validity of a prohibition of competition, bearing in mind that a violation of a valid prohibition of competition can have far-reaching consequences: the employer can demand the cessation of the competing activity, as well as damages (e.g. loss of earnings) and contractual penalties if these have been agreed.
Answer to the second question: The music teacher is not obliged to sign this type of letter from the school management. Without this signature, no prohibition of competition applies after the end of the contract (unless a prohibition had already been agreed in the employment contract or in some other way). As a result, after termination of the contract, the music teacher can, for example, take back any students he or she has brought with him or her to the music school, if the students so wish. And even if a prohibition of competition had already been agreed in writing beforehand or in this letter, there would be a good chance that, for the above-mentioned reasons, this prohibition would be declared null and void in court. It is therefore worthwhile in such cases to clarify the situation precisely, and not to allow yourself to be restricted in the organization of your working life after the end of the contract. In doing so, it is important for the music teacher to point out to the school director that it will be legally almost impossible to enforce such a prohibition of competition after the end of the contract. There is no supreme court ruling on this issue, only cantonal judgments are available. Consequently, as long as there is no Federal Court ruling, a residual risk cannot be ruled out. But it is worth opposing both the signing and the implementation of such a competition ban.
An example from the practice of the legal advisor of the Swiss Society for Music Pedagogy SSPM: Yvette Kovacs, Doctor of Law, SSPM legal advisor and attorney-at-law in Zurich, answers questions from SSPM members.
1. Problem statement
Question from an SSPM member: My music school recently started offering adult education. It has sent a letter of dismissal to all teaching staff and invited them to sign a new contract stipulating that they are no longer allowed to teach music privately in the area served by the music school. It is specified that this ban on competition can be lifted in exceptional cases, if the teachers announce the students concerned and request the corresponding authorization.
Question from another SSPM member: Shortly after resigning from a music school, a teacher received a letter from the director stating that his students were to remain at the music school. The teacher was asked to confirm this with his signature and return the signed letter to the principal.
2. Prohibition of competition during the term of the contract
Basis : For the duration of the employment relationship, the employee is subject to a duty of care and loyalty pursuant to art. 321a CO (Swiss Code of Obligations). This stipulates in particular that, during the term of the contract, the employee must not perform paid work for a third party insofar as this violates his duty of loyalty and, in particular, competes with the employer. Competition exists when equivalent services are offered which meet the same customer needs and concern at least the same part of the customer base. This principle applies entirely to full-time employees. Those working part-time are often obliged, for financial reasons, to be able to carry out another activity. When the employee and employer agree to a part-time position, they tacitly accept that the employee will carry out complementary ancillary activities, particularly in his or her usual field of activity, and that the prohibition on competition is thus removed. This presumption of tacit consent on the part of the employer is only valid, however, if no conflict of interest arises between the various part-time jobs, and if the duty of loyalty as defined by labor law remains guaranteed. In addition, the parties may expressly agree that a competing ancillary activity is prohibited. In practice, a complete ban on any further part-time work is often replaced by regulations stipulating that part-time work in other, competing activities is only permitted with the prior written consent of the employer.
Answer to the first question: In principle, an employer is legally entitled to conclude contracts only on condition that the teachers are not engaged in competing activities, either privately or at another music school. Music schools are also permitted to give notice of "termination-modification", i.e. to terminate an employee's employment in due form and time, and then ask the employees concerned to enter into a new contract including a non-competition clause. Similarly, music schools are not legally prohibited from providing for an obligation to announce and approve such competing activities, instead of a complete ban. The music school's procedure is therefore legally correct.
For workers who receive such an offer from their employer, the following points need to be clarified:
- on a formal level: is it really a competing activity?
If the music school teaches exclusively to children/young people or exclusively to adults, private tuition or tuition at another school is only considered as competing if it is aimed at the same groups of pupils.
- geographically: does the competing activity actually take place in the area served by the music school?
Teachers only compete with the music school if they teach the same groups of pupils, i.e. if the pupils they teach would have attended the music school if they hadn't been teaching. Consequently, it is important in such regulations that the area served by the music school is closely defined, and that the private activity is carried out somewhat outside this area.
- In terms of content: does the music school offer the specific instrument or branch taught by the music teacher?
Teachers who privately teach instruments or disciplines other than those offered by the music school are not in competition with it, and can therefore continue to teach without further ado.
It is always dangerous to violate the duty of loyalty inherent in the employment contract, and in particular the prohibition on competition, as in judicial practice such cases have regularly led to immediate dismissal.
3. Prohibition of competition after termination of contract
Grounds: The legal prohibition on competition under art. 321 a CO ends with the termination of the employment contract. It follows that, after termination, an employee may in principle immediately engage in another activity in competition with the former employer, whether privately or with another employer. It is irrelevant whether, depending on the circumstances, the employee who leaves his employer takes with him considerable knowledge acquired during his previous employment and puts it to work for the new employer or uses it for his own benefit.
The only way to avoid this situation is for the employer and employee to agree a non-competition clause after the end of the contract (art. 340 ff, CO). However, this is only binding in a very limited context. In particular, the employee must have acquired knowledge of the employer's clientele or manufacturing or business secrets during the employment relationship, and the use of this information must be such as to cause the employer appreciable prejudice. In addition, the prohibition of competition after the end of the contract must be agreed in writing, otherwise it is invalid. Oral or e-mail agreements are not sufficient. Furthermore, the prohibition must be appropriately limited in terms of place, time and type of business, and may only exceed three years in very special circumstances. Excessive bans on competition cannot be imposed by judicial means, and are limited accordingly or annulled by the judge. The following principles therefore apply to music teachers:
- There is no automatic ban on competition after the end of the contract.
- After the end of the contract, teachers are free to decide whether they wish to work in other music schools and/or as private tutors.
- There is no obligation to enter into a prohibition of competition agreement.
- A prohibition of competition is only valid in writing, i.e. it must be signed by hand or with a certified signature.
- A ban on competition must be clearly and narrowly delimited as to location, its duration may not exceed three years, and it must be restricted to the activity carried out at the music school.
Even if all these requirements are met when a non-competition clause is entered into, there is a good chance that the prohibition on competition after the end of the contract will be deemed invalid. This is for the following reasons:
- The prohibition of competition is only valid if the employment relationship enables the employee to gain knowledge of the employer's clientele or manufacturing or business secrets, and if the use of this information is likely to cause the employer appreciable harm (art. 340, para. 2, CO). According to consistent doctrine and case law, it is not possible to assert a prohibition of competition when the link to customers is primarily based on the employee's particular abilities and personal skills, and his relationship with customers is mainly of a personal nature. In this case, customers do not stay with the worker because of the knowledge he has acquired with the employer, but because of his personal qualities and skill. After the end of the contract, the worker does not use the skills he has acquired with the employer, but his personal characteristics, which cannot be prohibited by a prohibition on competition. Case law has confirmed this in the case of gymnastics and dance teachers, a ladies' hairdresser, a riding instructor and, in the canton of Geneva, a piano teacher.
What all these professions have in common is that an employee's performance and success depend above all on his or her personal qualities, and not on the employer's knowledge and offerings. These personal qualities are in themselves decisive with regard to a possible change of clientele, and the more creatively and freely the employee can act, the more reason to presume that this is the case (judgment of 4.3.2008 by the Zurich Supreme Court, ATF 130III353 ff and ATF 138III67 ff). There is therefore a good chance that a ban on competition after the end of the contract, even if valid on the face of it, will not be protected by a court on this basis, and that the employee will be able to work freely after the end of the contract, whether privately or as an employee, even if he is in competition with his previous employer.
The prohibition on competing ceases when the employee can prove one of the following:
- if it is established that the employer no longer has a real interest in maintaining the ban (he ceases his activity or no longer offers the discipline in question);
- if the employer terminates the contract without justifiable reason attributable to the employee;
- if the employee terminates the contract for a justified reason attributable to the employer.
It is important to always clarify the validity of a prohibition of competition, bearing in mind that a violation of a valid prohibition of competition can have far-reaching consequences: the employer can demand the cessation of the competing activity, as well as damages (e.g. loss of earnings) and contractual penalties if these have been agreed.
Answer to the second question: The music teacher is not obliged to sign this type of letter from the school management. Without this signature, no prohibition of competition applies after the end of the contract (unless a prohibition had already been agreed in the employment contract or in some other way). As a result, after termination of the contract, the music teacher can, for example, take back any students he or she has brought with him or her to the music school, if the students so wish. And even if a prohibition of competition had already been agreed in writing beforehand or in this letter, there would be a good chance that, for the above-mentioned reasons, this prohibition would be declared null and void in court. It is therefore worthwhile in such cases to clarify the situation precisely, and not to allow yourself to be restricted in the organization of your working life after the end of the contract. In doing so, it is important for the music teacher to point out to the school director that it will be legally almost impossible to enforce such a prohibition of competition after the end of the contract. There is no supreme court ruling on this issue, only cantonal judgments are available. Consequently, as long as there is no Federal Court ruling, a residual risk cannot be ruled out. But it is worth opposing both the signing and the implementation of such a competition ban.
