Client Transfer and Change of Position

It is essential to clarify which clauses in the contracts are relevant.

Distinguish between client protection clauses and client takeover clauses.

The former protect the employer from the loss of clients, while the latter regulate compensation for the takeover. The latter are only to be measured at the limits of immorality (§ 138 para. 1 BGB) and are compensable if they serve the protection of a legitimate business interest of the employer and do not unreasonably impede the employee’s professional advancement (BAG 11.12.2013 – 10 AZR 286/13, NZA 2014, 433 (435)). Most clauses in practice are referred to as client protection clauses but are, in fact, client takeover clauses. The lack of transparency or the surprising nature of general terms and conditions can also be justified by misleading headings (BGH, NJW 1977, 195) – therefore, these clauses can often be challenged solely because of the incorrect designation.

b) Conditions of Client Takeover Clauses

Furthermore, the exact conditions of the client takeover clause need to be examined to assess its effectiveness.

A so-called client takeover clause that allows a tax assistant to take over clients from her former employer after leaving but simultaneously obliges her to remit a reasonable share of the revenue from these clients to her former employer as compensation is generally permissible according to jurisprudence. However, it must not exceed a binding period of two years. The employment contract obligation of a tax assistant to remit 20% of the annual revenue from such clients to her former employer as compensation for five years upon leaving, whom she has taken over, constitutes a concealed client protection clause and is considered circumvention under § 75d sentence 2 HGB. Therefore, the former employer cannot derive any claims from such an agreement (BAG, judgment of August 7, 2002 – 10 AZR 586/01, NZA 2002, 1282). In the literature, at most 25% are considered permissible (Bauer/Diller, Non-compete Agreements, 2006, para. 173; BeckOK Labor Law, as of March 1, 2023, § 74 HGB para. 15-17).

c) Client Takeover Clause in relation to the activity

A client takeover clause should only extend to subsequent independent activities and not to the future dependent employment of the employee with a third party. Such client takeover clauses would be impermissible and classified as concealed client protection clauses if agreed upon without compensation, circumventing §§ 74 ff. HGB (BAG 11.12.2013 – 10 AZR 286/13, NZA 2014, 433 (436)). Depending on the situation, one might consider initially starting the new position as an employee to avoid the client takeover clause and take the clients with them. In that case, one would not be self-employed and could invoke the cited court decision. A change to a self-employed position as a partner and managing director after a reasonable period could be contractually stipulated at the time of the change, providing additional security.

3. Judgment of the Labor Court Leipzig (Judgment dated January 5, 2012 – 7 Ca 2046/11)

In this case, the plaintiff was a nationwide auditing and tax consulting firm, and the defendant was a lawyer and tax consultant there, later becoming a partner at a competing company. This is the client takeover clause being disputed:

 “If, after leaving the company, you engage in independent or dependent employment in one of the aforementioned professions, and if you or a new employer or a partnership or company entered into by you takes over clients of the company who, in connection with your termination of employment from the company, terminated or did not renew the ongoing or recurring contractual relationship with the company, you are obligated to remit to the company, for a duration of two years, an amount equal to 20% of the fees (exclusive of VAT) due from such contracts; in the case of dependent employment, the annual remittances are limited to half of your last annual remuneration received from the company.”

The Labor Court Leipzig considered the wording in the client takeover clause so imprecise that it did not even acknowledge the plaintiff’s claim: “With regard to claim 6, it remains completely unclear what the plaintiff means by ‘clients who have terminated or not renewed their ongoing or recurring contractual relationship with the plaintiff in connection with the defendant’s departure from the plaintiff'” (Labor Court Leipzig Judgment dated January 5, 2012 – 7 Ca 2046/11, page 11).

 “The formulation ‘in connection with your departure from the company’ is even more unclear – referring to the termination of the contractual relationship between the defendant and the plaintiff. Whether this merely implies a temporal connection, such as requiring the clients to have terminated their contractual relationship with the plaintiff by the same date the defendant left on March 31, 2010, or if an actual connection is intended, involving the causality of the defendant’s departure from the plaintiff for the termination of the client contracts, is in no way apparent. Nor is it clear whether, in the latter case, the defendant must have caused the client transition blameworthy – at least through active conduct” (Labor Court Leipzig Judgment dated January 5, 2012 – 7 Ca 2046/11, page 14).

“Establishing a connection is difficult to trace. Ultimately, every taken-over mandate is related to the departure because without this departure, the former employee could not have taken over any mandates. However, even upon closer inspection, the necessary causal connection remains unclear. For example, is it sufficient if the client switches one/two/three years after the departure because they were annoyed by the subsequent case handler, heard about the now-established good reputation of the departed, and remembered that this person used to be ‘their’ case handler?

“Furthermore, the clause is ineffective to the extent that it obligates the defendant to pay 20% of the fees entirely regardless of whether a profit remains from the fee earned before or after the 20% remittance or even a loss is recorded ” (Labor Court Leipzig Judgment dated January 5, 2012 – 7 Ca 2046/11, page 15).

4. Control of general terms and conditions

An essay goes further in this context than the judgment of the Labor Court Leipzig. The question of the permissible amount of a participation rate is not clarified contrary to widespread belief (Meier, NZA 2013, 253, 254).

Firstly, it should be noted for completeness that former employees are consumers within the meaning of § 310 III BGB. Therefore, the multiple use of the employment contract (§ 305 I 1 BGB) is irrelevant unless the clause was introduced by the employee or the employee had no influence on its content due to pre-formulation (§ 310 III No. 2 BGB). The burden of proof lies with the entrepreneur to demonstrate that the employee had such an influence (e.g., LAG Rheinland-Pfalz, judgment of September 14, 2012, 9 Sa 254/12, BeckRS 2012, 75943).

An unreasonable disadvantage may arise from the fact that the provision is not clear and understandable (§ 307 I BGB) or does not sufficiently exclude circumstances that would lead to an unreasonable disadvantage for the employee. In this case, an interpretation of the clause in the sense of excluding unreasonable disadvantages is equivalent to an impermissible maintaining reduction and is therefore also inadmissible. The goal of the law is to promote a reasonable content of general terms and conditions used in practice. The contracting partner of the user should be provided with the possibility of appropriate information about the rights and obligations arising from the pre-formulated contract. This goal cannot be achieved if every user of general terms and conditions could initially exceed the limit of what he could justifiably agree to his advantage. If this were considered permissible, it would result in contracting partners of the user being confronted with exaggerated clauses in contract practice. Only in a legal proceeding could they reliably learn the extent of their rights and obligations. The transparency requirement of § 307 II 2 BGB would largely be meaningless (Meier, NZA 2013, 253, 254).

The ineffectiveness due to economic disproportionality also continues to apply because the clause leads to a 100% remittance of all income in certain situations it encompasses. This is due to the inclusion of partnerships and other companies. For example, if five members of a team leave, who jointly handled a mandate, join together and, within the framework of the new company, handle the same client, each of them owes 20% of the fee income from this client relationship due to the lack of ordered joint and several liability, all together, therefore, 100% of the fee income, an obviously unreasonable consequence. Since the clause contains no restrictions in this respect, it unfairly disadvantages the defendant (Meier, NZA 2013, 253, 256).

Finally, it should be considered that the remittance obligation is supposed to exist independently of who triggered or even caused the termination of the employment relationship. Even if the reason for leaving was a free decision of the employer (probationary period termination, expiration of a fixed-term contract, operational termination) or even if the employee terminated but at the instigation of the employer (unreasonable behavior, overdue salary), according to the wording of the clause, this does not change the remittance obligation. Therefore, it is also ineffective for this reason (BAG, NZA 2006, 1042), as it can lead to the employer not only depriving the employee of their salary income with a termination, but also adversely affecting their future income without their own performance, deviating from Art. 12 GG.

While a scholarly essay does not initially have the authority of a judgment, the arguments speak for themselves.