A non-compete clause in a B2B contract is generally allowed — entrepreneurs can agree on it within the freedom of contract. Here, however, the provisions of the Labour Code that protect employees do not apply, so the effectiveness of the clause is determined by the general rules of the Civil Code: scope, duration, remuneration for refraining from competition and the proportionality of penalties. A clause that in practice deprives the contractor of the possibility to earn a living may be held to be invalid.
Where the limits of the clause in B2B come from
The basis is Article 353¹ of the Civil Code: the parties may shape the legal relationship at their discretion, provided that its content or purpose does not run counter to the nature of the relationship, the statute or the principles of community life. It is supplemented by Article 58 — an act contrary to the principles of community life is invalid, and if the defect concerns only part of the agreement, the rest usually remains in force.
For a non-compete clause this means that the court assesses the whole: whether the restriction protects a real interest of the ordering party (e.g. the company's specialised know-how, relationships with clients), whether it is narrow in time and subject matter, and whether the contractor gets an equivalent for it. The absence of any of these elements does not automatically determine invalidity, but weakens the clause.
Reference point: the non-compete clause in an employment contract
The Labour Code does not apply to B2B contracts, but its rules are sometimes treated as a model of a reasonable restriction. For an employee a non-compete clause after the end of employment:
- requires a separate agreement in written form under pain of invalidity,
- applies to people with access to particularly important information,
- must specify the duration and the compensation — not lower than 25% of the remuneration from the period corresponding to the duration of the clause,
- lapses earlier when the reasons for the clause cease or the employer does not pay the compensation.
In B2B none of these requirements is mandatory. A clause modelled on these rules is, however, harder to challenge and more fair to both parties.
The clause during and after cooperation
| Element | During the contract | After the end of the contract |
|---|---|---|
| Typical scope | direct competitors of the client, projects of the same end client | a narrow list of entities or projects |
| Compensation | usually included in the rate | should be set separately and paid periodically |
| Risk of invalidity | low, if the scope is clear | high with long duration and no compensation |
| Most frequent dispute | whether a new client is a "competitor" | the amount of the penalty and non-payment of compensation |
The safest clauses are those pointing to specific companies (e.g. in an annex) or to a market segment, and not to the whole IT industry. The provision "ban on cooperation with any entity operating in the area of software" effectively prevents practising the profession and is the first candidate for challenge.
Contractual penalties for breach
A non-compete clause is a non-monetary obligation, so it can be secured with a contractual penalty. The Civil Code, however, allows a reduction of the penalty where it is grossly excessive. In negotiations it is worth:
- linking the amount of the penalty to the amount of the compensation for the clause (e.g. no more than a few times that amount),
- stipulating that the penalty is due once for a given breach, and not for every day,
- providing for a prior demand to cease the breach,
- adding the contractor's right to withdraw from the clause if the client stops paying the compensation.
Non-compete clause and business secrets
Many companies include a non-compete clause when in reality they want to protect information. Information is protected independently: the Act on combating unfair competition treats the disclosure, use or acquisition of another party's business secret as an act of unfair competition. A sensible compromise is therefore to give up a broad clause after the end of the contract in favour of:
- a precise confidentiality clause (without a time limit for secrets),
- a ban on soliciting the client's customers and employees for a defined time,
- an obligation to return or delete documents and access rights.
Compensation for the clause and taxes
For a contractor settling VAT, the compensation for refraining from competition is not neutral. The VAT Act also treats as a supply of services an obligation to refrain from an act — the compensation is therefore remuneration for a service and generally requires an invoice with VAT. For income tax it is revenue from the business activity; under ryczałt (lump-sum tax on recorded revenue) the rate for such revenue should be agreed with the accountant before the first invoice.
Example
Mr Tomasz earns PLN 20,000 net per month under his contract. The client proposes a ban on cooperation with three indicated competitors for 12 months after the end of the contract, with compensation of 30% of the rate, i.e. PLN 6,000 net per month, and a penalty equal to three times the monthly compensation. As an active VAT payer, Mr Tomasz issues each month an invoice for PLN 6,000 plus PLN 1,380 of VAT. When the client fails to pay for two months in a row, under the agreement the clause lapses.
Negotiation checklist
- Is the clause needed after the end of the contract, or is confidentiality enough?
- A list of specific competitors or a tightly described market instead of the whole industry.
- Duration after the end — the shorter, the better; 6–12 months is a common compromise.
- Compensation payable monthly, with the clause lapsing in case of non-payment.
- A penalty that is proportionate and one-off for a given breach.
- The client's right to release the contractor early from the clause — with clear consequences for the compensation.
Overly extensive restrictions (exclusivity, a ban on working for others during the contract, fixed hours) also increase the risk that the cooperation will be assessed as employment — this is described in the article on reclassifying B2B as an employment contract.
A clause already signed — what can be done
- An annex — when extending the contract or changing the rate this is a natural moment to narrow the clause or add compensation.
- A written release from the clause — before moving to a new client it is worth asking the current ordering party whether they will agree to release from the clause in a specific case; written consent closes the matter.
- Documentation — if the new client operates in a different segment, it is good to keep materials that show this (offer, project description, business profile).
- Dispute over the penalty — in a dispute the court may reduce a grossly excessive penalty or hold the clause or part of it invalid; the assessment depends on the circumstances of the specific case.
How Good Balance can help
We analyse non-compete clauses before signing and propose wording that protects the client's interest without blocking the contractor's business. The scope of the service is described on the drafting and reviewing contracts page, and in urgent matters we invite you to a legal consultation.