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Restrictive Covenants in Hungary

1. Definition of Restrictive Covenants

The employer and the employee can agree that after the termination of the employment (for a compensation) the employee shall not engage in any conduct, which may infringe upon or jeopardize the rightful economic interests of the employer. Such non-compete period can be determined up to two years following the termination of the employment relationship.

2. Types of Restrictive Covenants

a. Non-Compete Clauses

The employee may undertake that he shall not pursue any business, which competes with the employer’s business.

b. Non-solicitation of customers

Employee may undertake not to solicit the employer’s clients and customers for his own benefit or the benefit of a competitor. In case of non-solicitation provisions the employee is entitled to compensation. The amount of compensation depends on the period of the agreement and the scope of restrictions.

c. Non-solicitation of employees

The employee may undertake not to solicit the employer’s other employees to leave the employer for his own benefit or the benefit of a competitor. In case of non-solicitation provisions the employee is entitled to compensation. The amount of compensation depends on the period of the agreement and the scope of restrictions.

3. Enforcement of Restrictive Covenants—process and remedies

The employer and the employee have the right to stipulate penalty payments apart from the right to damages in case of breaching a restrictive covenant. They are entitled to file an action with the court in such case.

4. Use and Limitations of Garden Leave

In Hungary there are no limitations of garden leave. The employer can decide that the employee is obliged to stay away from work during the notice period (or at any other time), while still remaining on the payroll of the employer.

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