Non-Compete Agreement in Spain: Limits and Compensation

If you have a non-compete agreement and a better offer has come up, the first thing is not to decide out of fear. You can tell Fernanda Vargas, employment lawyer in Madrid, about your case on WhatsApp or book an appointment on Calendly. I’ll explain it through Iván’s story, which is exactly the situation in which many people remember that clause they signed years ago and never looked at again.

Iván is 38, lives in Valencia, and has worked for five years as a sales representative at a medical supplies distributor. His contract contains a short sentence, the kind that goes unnoticed among many others: «At the end of the employment relationship, the employee may not provide services to competing companies for two years.» Now another distributor in the same sector calls him. It offers him a professional change that interests him. Iván submits his resignation. And his boss immediately warns him: «If you go to the competition, we’ll sue you for breaching the agreement.»

The question is not whether that threat sounds serious. The real question is different: whether that agreement is valid. Because a signed clause cannot always be enforced exactly as written.

«If You Go to the Competition, We’ll Sue You»: Iván’s Offer

When you change companies within the same sector, the problem usually appears like this. Not while you are comfortable in your position. It appears on the day you want to leave. Then the contract, the emails, the warnings, and that feeling that maybe you signed something that ties you down more than you thought all come back.

That is exactly what is happening to Iván. He does not want to do anything improper. He does not intend to take documents, customer lists, or sensitive information. He just wants to accept an offer from another company in the same market. But the clause he signed seems categorical: two years without working for competitors. And, in addition, neither his contract nor his pay slips show any amount identified as compensation for that restriction.

There are two very common mistakes here. The first is thinking that, because you signed it, there is nothing left to review. The second is believing that, if the company threatens to sue, it must be right. Neither is true. In fact, when talking about employment clauses, it is worth remembering that your signature does not make any waiver or restriction automatically valid; that is why it is useful to understand when what you sign in an employment contract is actually valid.

In Iván’s case, the answer lies in a basic distinction: one thing is competing while you are still working for the company, and something very different is being prevented from competing after the contract ends.

Competing While You Work and Competing Afterward: Two Different Rules

Imagine that Iván, before resigning, were already selling for another distributor at the same time or favoring a competitor while still on the payroll. That scenario is not analyzed as a post-contractual agreement. A different rule applies there: the duty of good faith in the employment relationship and the prohibition of unfair competition. Put simply, while you work for a company you cannot act against its interests by competing unfairly with it.

«A worker may not perform work for several employers where this is considered unfair competition […].»

That means that, if you are still employed, you cannot play both sides where there is unfair competition. No special agreement is needed for that. It is part of the basic rules of the employment relationship.

But that is not Iván’s situation. He is already leaving. What his company wants to prevent is what he does after the contract is terminated. And there it is not enough to say “you cannot go to the competition.” A valid post-contractual non-compete agreement is required. In other words, a clause that meets exactly the requirements set by law.

This difference matters a great deal. Because during the contract the company’s room to demand loyalty is clear. After the contract, by contrast, you are dealing with a restriction on your freedom to work. And that is why the law does not allow it just any way.

What the Law Says: Maximum Duration and Two Requirements

Let’s go back to Iván’s clause. Two years without working for competitors. It sounds forceful. But the right question is not whether it sounds forceful. It is whether it fits the law.

«A non-compete agreement for the period after termination of the employment contract, which may not last longer than two years for technical employees and six months for other employees, shall only be valid if the following requirements are met: a) That the employer has a genuine industrial or commercial interest in it. b) That the employee is paid adequate financial compensation.»

Translated into plain language, the law sets three very clear limits.

• It cannot last as long as the company wants. The maximum is two years for technical employees and six months for other employees.
• It is not enough for it to appear in writing. The company must have a real interest in imposing that restriction.
• It is not free. If they require you not to work for the competition when you leave, they must pay you adequate financial compensation.

Also, because this agreement limits your freedom to work, it is interpreted strictly. That means it cannot be stretched or completed with assumptions. Either it meets the legal requirements and limits, or it does not.

What It Means for There to Be a “Genuine Industrial or Commercial Interest”

It cannot simply be invoked automatically for any position. The idea is that the company has a real interest in protecting itself because, due to your duties, your knowledge, or your contacts, you could cause it harm by working for a competitor.

For a sales representative like Iván, that discussion may come up because of the customer portfolio, knowledge of the market, or commercial strategy. But even if that interest exists, the company still needs to meet the other essential requirement: paying you adequate compensation.

The Prohibition Cannot Prevent You From Working “in General”

Another important point is the scope of the clause. A non-compete agreement should not become a general prohibition on earning a living. It must refer to activities that are genuinely competitive. Not any job, not any company in the sector without qualification, and not duties that in fact do not compete with the activity you performed.

That is why, when you read a clause, you should not look only at the time period. Also look at what exactly it prohibits you from doing. Because one thing is to limit a direct move into genuinely competing activity, and something very different is trying to block your professional career across the board.

Compensation: Without It, There Is No Agreement

This is the point that decides Iván’s case. The prohibition appears in his contract. But no financial compensation for accepting it appears there. Nor does any amount identified for that concept appear on his pay slips. And that is not a minor detail. It is an essential requirement.

If they require you not to work for the competition after leaving the company, they are asking you for a sacrifice: to limit your options in the market. The law only allows that restriction if you are paid adequate financial compensation. If there is no compensation, or if it is merely symbolic, the agreement is not valid.

In addition, it is advisable for that compensation to be clearly identified as such. Why? Because if it is mixed into your salary without explaining which part corresponds to the non-compete agreement, problems arise later: the company says it did pay, the employee says it did not, and everything becomes debatable. The clearer the clause and the payment method, the fewer doubts there will be.

In Iván’s case, the lack of compensation leaves the clause without one of the legs supporting it. That is why, as drafted, it is unenforceable.

Technical Employee or Not? Why It Matters for Duration

Suppose for a moment that Iván’s company had in fact provided for adequate compensation. Even then, another key question would remain: can it impose two years of non-compete on him?

The law distinguishes between technical employees and other employees. For technical employees, the maximum is two years. For others, the maximum is six months. It is not a minor difference. It is the difference between being able to accept an offer in the sector soon or being restricted for much longer.

In practice, the label the company gives you is not enough. What matters are the actual duties of the position. In the story we are looking at, Iván works as a sales representative. And, in this case, he does not qualify as a technical employee in the sense of the legal clause that allows up to two years. That is why, even if there had been compensation, the maximum that fits his situation would be six months, not two years.

Here again you can see why these agreements must be interpreted carefully. It is not about repeating what the contract says, but about checking whether its content complies with the law. A duration longer than permitted is a real problem, not a mere formal defect.

That said, the fact that Iván may accept the offer does not mean he can take confidential information or use secrets from his former company. Regardless of the non-compete agreement, that obligation not to use confidential information still exists.

If You Breach It: What They Can Claim From You

The threat of “we’ll sue you” is not always empty. But it only truly has force when there is a valid agreement. If the agreement meets the legal requirements and you breach it, the company may claim consequences from you.

• The repayment of the compensation received, because they paid you precisely not to compete.
• And, where appropriate, damages for the harm that breach caused the company.

Think of a simple example. If an employee receives clear compensation for accepting a valid agreement and, despite that, immediately goes into competing activity covered by the clause, the company can argue that the employee breached what was agreed and claim accordingly. A different matter is taking the outcome of a lawsuit for granted. It is never advisable to present that as automatic.

By contrast, if the agreement is not valid, the company’s position changes a great deal. And that is precisely what happens to Iván: the clause fails on an essential requirement and, in addition, sets a duration that does not fit his position.

If instead of joining another company you are thinking of leaving to start your own project, it is also worth reviewing whether that new activity would actually compete with the former one. And, if you need liquidity to get started, you may find it useful to understand how to capitalize unemployment benefit when starting a business in Spain.

Can the Company Cancel the Agreement to Avoid Paying?

This question comes up a lot when the employee leaves and the company thinks: “If I am no longer interested in maintaining the prohibition, I will cancel the agreement and save the compensation.” But it is not that simple.

Once the contract has ended, the courts have in many cases rejected the idea that the company can cancel the agreement by its sole will in order not to pay what had been agreed. The underlying idea is easy to understand: if the agreement binds the employee, it also binds the company. It cannot be left to the whim of only one party once it has produced its effects or once the employee’s departure has already taken place.

That is why it is worth reading the specific wording of the clause very carefully. You need to review exactly what it says about duration, scope, compensation, and possible ways it may end. If you want Fernanda Vargas, employment lawyer in Madrid, to review your contract and your departure from the company as part of her employment law service, she can guide you based on the specific wording you signed and your actual position.

In Iván’s case, this discussion does not even save the agreement. The company is not dealing with a valid agreement that it later wants to deactivate. It is dealing with a clause that already has an essential problem from the outset: it does not provide for adequate compensation.

Checklist: Is My Non-Compete Agreement Valid?

If you are in a situation similar to Iván’s, go through this list. It will help you spot whether the clause deserves a serious review.

• Does it refer to the period after the contract ends? If the issue is while you are still working, you are in different territory: good faith and unfair competition.
• Does the duration comply with the legal maximum? Two years for technical employees and six months for other employees.
• Does the company have a real industrial or commercial interest? There must be a genuine reason connected to your position, your knowledge, or your contacts.
• Is there adequate financial compensation? If not, the agreement is not valid.
• Is that compensation clearly identified? It is advisable that it not be confused with ordinary salary.
• Is the prohibition limited to genuinely competing activity? It should not prevent you from working in general.
• Does your position truly qualify as technical? A label is not enough; the actual duties matter.
• Have you checked whether the company is trying to release itself from the agreement on its own? What was agreed usually cannot be set aside solely by the employer’s will once the contract has ended.
• Are you clear that confidentiality still binds you? Even if the agreement fails, you cannot use confidential information from your former company.

And that is how Iván’s story is resolved: the agreement is not valid as drafted. Adequate financial compensation is missing, and that is an essential requirement. In addition, as a sales representative, a two-year duration does not fit his case; the maximum would be six months. That is why he may accept the offer from the other distributor, as long as he respects the duty not to use confidential information from his former company. If the agreement had included adequate compensation, a lawful duration, and a genuinely competing scope, then he would indeed have had to comply with it or assume, in the event of breach, repayment of what he received and, where appropriate, damages.

Frequently Asked Questions

If you want to clear up any doubts about your contract or the offer you have received, you can write to Fernanda Vargas on WhatsApp or book a consultation on Calendly. A timely review can save you from signing away too much or giving up a job that you actually can accept.