The non-competition clause, included in a labor contract or in an annex to it, consists in the absolute prohibition of the employee to disclose information gained in the work process or to perform any act of competition to the employer during the existence of the contract and for a period after its closing.

The employee is prevented by this clause, after termination of the contract, to perform in his own or a third party an activity which is in competition with company employing. There is also compensation in the form of a monthly non-competition compensation which the employer is required to pay the full non-competition period.

Characteristics of non-competition clause:

• can take effect for a period not exceeding 2 years from the date of termination of the individual labor contract
• can’t have the effect of entirely prohibiting the employee to exercise his profession
• provides expressly the prohibited activities of the employee after the termination date of the contract
• specifies the values of monthly non-competition compensation and the operating period
• provides the third parties for whom the employee can’t perform activity and the geographical area in which the employee may be in real competition with the employer.

Contributions due to the non-competition compensation

The non-competition compensation is an expense of the employer, is deductible in calculating taxable income and taxed at the individual beneficiary, under Article 21, paragraph 3 of the Labor Code.

According to the Tax Code, the monthly compensation paid by the employer on non-competition period is considered employment income and taxed as such.

Thus, on this amount is due:

• Tax;
• Contribution to health insurance
• Contribution to the Guarantee Fund for the payment of budgetary debts

But social security contributions employers and employees, insurance against accidents at work and occupational diseases, unemployment for employee and employer and any medical leave are not to be paid.

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