Companies routinely attempt to protect their assets from transferring to competitors by imposing bans on poaching employees and restricting competition. In practice, however, when disputes arise in Russia, such clauses are frequently invalidated. In this overview, we examine why this happens and which legal instruments actually work.
Key Meanings
Consequences of Violation
The most common remedies for breach of NCA and NSA agreements in practice are termination of employment, compensation for damages, and payment of a penalty.
NCA and NSA with the CEO
The position of a company's head differs fundamentally from that of other employees — the law provides the employer with protective mechanisms even without special contractual arrangements.
(1) A CEO may work part-time for another employer only with the written consent of the company's authorized body.
This rule applies to any external part-time employment — regardless of whether the sole executive body holds a managerial position with the new employer or an ordinary role.
(2) The employer is protected by the director's duty to act in good faith and in the company's best interests.
If the head engages, independently or with partners, in competing activities — particularly using the employer's assets and corporate opportunities — they are fully liable for both damages and lost profits of the company. This is a special case, since as a general rule, an ordinary employee is liable only for actual damages.
Conclusion: With respect to a CEO, the employer's interests are protected at the statutory level by default. Therefore, even in the absence of signed NCA or NSA agreements, the director can be held liable for damages caused by corporate disloyalty.
Recommendations: To avoid misunderstandings and maximize protection of business interests, we recommend establishing the following in the corporate documents (charter, regulation on the sole executive body, etc.) and in the employment agreement with the director:
(i) a ban on external part-time employment or a procedure for obtaining consent for it;
(ii) a list of actions requiring approval from the company's authorized bodies, along with the procedure for obtaining such approval;
(iii) a procedure for disclosing conflicts of interest;
(iv) an obligation to maintain the confidentiality of trade secrets. Note that for this instrument to function effectively, the full range of measures prescribed by law must be implemented (adopting internal policies, recording the transfer and return of confidential information storage media, marking such media with appropriate classification labels, etc.).
NCA and NSA with Ordinary Employees
For second-tier management (C-level executives — CFO, COO, CMO, CIO, etc.) and all other employees, the picture is significantly less favorable for the employer.
1. The position of courts and the Ministry of Labor is virtually uncompromising — non-compete and non-solicitation clauses are consistently invalidated as provisions that worsen the employee's position compared to labor legislation and restrict their right to freedom of labor.
2. With respect to non-disclosure agreements for trade secrets, the approach is far more lenient — such clauses are permissible if properly formalized and the company has taken all necessary measures for their enforcement.
3. Established approaches in judicial practice:
Permissible Alternative No. 1: Employee Motivation
The prevailing practice does not deprive the employer of the ability to reach an arrangement with the employee — not through bans and penalties, but through positive motivation: an agreement providing financial incentives to the employee for voluntarily refraining from competing activities.
Essence: After termination of the employment agreement, the former employer pays the employee a sum of money for the period during which the employee refrains from competition or from poaching key colleagues. In this case, the employee has a genuine material interest in complying with the terms, and the employer has a lawful protection mechanism.
Permissible Alternative No. 2: Cost Reimbursement by the Counterparty
As noted earlier, including a ban on hiring employees in a contract with a counterparty constitutes prohibited labor discrimination. However, in certain cases, it is still possible to negotiate cost reimbursement with the counterparty. For example, instead of a penalty for poaching, an outsourcing company may provide for reimbursement of the costs of onboarding, professional training, and additional education of a new employee.
Relevant Court Cases:
Key Meanings
- Non-Compete Agreement (NCA) — an agreement restricting an employee from joining a competing company or establishing their own business engaged in similar activities.
- Non-Solicitation Agreement (NSA) — an agreement restricting the poaching of the former employer's employees and clients.
Consequences of Violation
The most common remedies for breach of NCA and NSA agreements in practice are termination of employment, compensation for damages, and payment of a penalty.
NCA and NSA with the CEO
The position of a company's head differs fundamentally from that of other employees — the law provides the employer with protective mechanisms even without special contractual arrangements.
(1) A CEO may work part-time for another employer only with the written consent of the company's authorized body.
This rule applies to any external part-time employment — regardless of whether the sole executive body holds a managerial position with the new employer or an ordinary role.
(2) The employer is protected by the director's duty to act in good faith and in the company's best interests.
If the head engages, independently or with partners, in competing activities — particularly using the employer's assets and corporate opportunities — they are fully liable for both damages and lost profits of the company. This is a special case, since as a general rule, an ordinary employee is liable only for actual damages.
Conclusion: With respect to a CEO, the employer's interests are protected at the statutory level by default. Therefore, even in the absence of signed NCA or NSA agreements, the director can be held liable for damages caused by corporate disloyalty.
Recommendations: To avoid misunderstandings and maximize protection of business interests, we recommend establishing the following in the corporate documents (charter, regulation on the sole executive body, etc.) and in the employment agreement with the director:
(i) a ban on external part-time employment or a procedure for obtaining consent for it;
(ii) a list of actions requiring approval from the company's authorized bodies, along with the procedure for obtaining such approval;
(iii) a procedure for disclosing conflicts of interest;
(iv) an obligation to maintain the confidentiality of trade secrets. Note that for this instrument to function effectively, the full range of measures prescribed by law must be implemented (adopting internal policies, recording the transfer and return of confidential information storage media, marking such media with appropriate classification labels, etc.).
NCA and NSA with Ordinary Employees
For second-tier management (C-level executives — CFO, COO, CMO, CIO, etc.) and all other employees, the picture is significantly less favorable for the employer.
1. The position of courts and the Ministry of Labor is virtually uncompromising — non-compete and non-solicitation clauses are consistently invalidated as provisions that worsen the employee's position compared to labor legislation and restrict their right to freedom of labor.
2. With respect to non-disclosure agreements for trade secrets, the approach is far more lenient — such clauses are permissible if properly formalized and the company has taken all necessary measures for their enforcement.
3. Established approaches in judicial practice:
- A post-employment non-compete ban is unenforceable.
- Covertly embedding NCA/NSA terms in a trade secret non-disclosure agreement renders them invalid.
- Damages, penalties, or fines cannot be recovered when an employee leaves for a competitor.
- Breach of an NCA/NSA is not a ground for dismissal.
- An obligation in a contract with a counterparty not to hire employees constitutes prohibited labor discrimination and must not be applied.
Permissible Alternative No. 1: Employee Motivation
The prevailing practice does not deprive the employer of the ability to reach an arrangement with the employee — not through bans and penalties, but through positive motivation: an agreement providing financial incentives to the employee for voluntarily refraining from competing activities.
Essence: After termination of the employment agreement, the former employer pays the employee a sum of money for the period during which the employee refrains from competition or from poaching key colleagues. In this case, the employee has a genuine material interest in complying with the terms, and the employer has a lawful protection mechanism.
Permissible Alternative No. 2: Cost Reimbursement by the Counterparty
As noted earlier, including a ban on hiring employees in a contract with a counterparty constitutes prohibited labor discrimination. However, in certain cases, it is still possible to negotiate cost reimbursement with the counterparty. For example, instead of a penalty for poaching, an outsourcing company may provide for reimbursement of the costs of onboarding, professional training, and additional education of a new employee.
Relevant Court Cases:
- Overview of the practice of arbitral courts in corporate disputes related to the application of Article 53.1 of the Civil Code of the Russian Federation (approved by the Presidium of the Supreme Court of the Russian Federation on July 30, 2025)
- Ruling of the Second Court of Cassation of General Jurisdiction dated June 3, 2025, Case No. 8G-13018/2025
- Ruling of the Second Court of Cassation of General Jurisdiction dated September 4, 2025, Case No. 8G-16602/2025
- Appellate ruling of the Moscow City Court dated September 30, 2025, Case No. 33-45254/2025
- Appellate ruling of the Moscow Regional Court dated March 27, 2024, Case No. 33-11424/2024
- Appellate ruling of the Supreme Court of the Chuvash Republic — Chuvashia dated July 7, 2025, Case No. 33-1675/2025
- Ruling of the Federal Arbitration Court of the Moscow District dated December 21, 2022, Case No. A40-77461/2022
- Decision of the Kirovsky District Court of Rostov-on-Don, Rostov Region, dated July 13, 2015, Case No. 2-4746/2015