1. Introduction

Non-compete clauses have yet to receive definitive scrutiny from the appellate courts, leaving them a largely unexplored and legally uncertain area of Cypriot employment law. Despite their widespread use, their enforceability remains unsettled, creating uncertainty for both employers and employees. In this guide, we first examine the arguments for and against the enforceability of non-compete provisions and then outline the position under Cypriot law as it currently stands. We subsequently consider how other common-law jurisdictions approach the issue, offering insight into how Cypriot courts may draw on more developed jurisprudence when the matter eventually reaches higher judicial scrutiny.

2. The Debate

Non-compete clauses are restrictive covenants, typically included in employment contracts, that prevent an employee from engaging in work that competes with their employer’s business after the employment relationship ends.

The case for enforcing non-compete clauses rests on the premise that they play an important role in protecting legitimate business interests. Employers often rely on such clauses to safeguard trade secrets, confidential information, commercially sensitive data and long-standing client relationships, particularly in sectors where competitive advantage depends heavily on internal know-how.

In contrast, non-competes are said to impose significant limitations on a worker’s rights. By restricting an individual’s ability to change jobs or start a competing business, these clauses can suppress wage growth, limit labour mobility and reduce opportunities for advancement. They may also stifle competition and innovation by constraining the natural movement of skills between firms, undermining start-up formation and slowing the diffusion of expertise. There is, moreover, growing concern that non-competes are sometimes imposed on employees who pose no genuine competitive risk, including those in lower-paid or routine roles, leading individuals to comply out of fear of litigation rather than out of any real legal necessity.

3. The Current Position

Restrictions During Employment

Under Cypriot law, employees normally have the right to take up additional employment, provided that any secondary work is performed outside the working hours agreed with their primary employer. This principle, that parallel employment should not be prohibited without justification, was reinforced with the enactment of Law 25(I)/2023, which implements the relevant EU Directive on Transparent and Predictable Working Conditions.

At the same time, the law recognises that unrestricted parallel employment may carry legitimate business risks. Accordingly, employers may limit an employee’s right to engage in additional work during the term of employment, but only if the limitation is: (a) clearly documented in writing; and (b) based on an objectively justified reason. The justification must rest on real and legitimate concerns, not merely the employer’s general preference, and is assessed through the lens of proportionality.

The statute identifies broad categories of objective reasons that may support such restrictions: for instance, health and safety, the protection of business confidentiality, safeguarding the integrity of the public-sector, or avoidance of conflicts of interest.

In practical terms, restrictions are most defensible when closely linked to the specific duties and responsibilities of the employee. In particular, clauses limiting parallel work are more likely to be considered reasonable when they cover roles that involve access to confidential information, specialised know-how, or commercially sensitive data, or when parallel work would create a direct conflict with the employer’s business.

Post-Termination Restrictions

Post-termination non-compete clauses remain a legally problematic and uncertain category under Cypriot law. The domestic legal framework, particularly Contracts Law, Cap. 149, provides a clear statutory backdrop. Under Section 27(1), any agreement restricting a person’s ability to carry on a lawful profession, trade or business is, in principle, void. This principle reflects a broader constitutional protection of an individual’s right to work and to engage freely in any trade or occupation. As a result, courts scrutinise any post-employment restriction that limits an employee’s ability to continue working after their departure from a role.

Despite this strict statutory backdrop, Cypriot courts have shown some willingness to uphold narrowly drafted, targeted post-employment restrictions, particularly where they do not prevent an individual from working altogether but instead focus on preventing specific conduct, such as interfering with existing client relationships. These decisions demonstrate that limited restrictions aimed at protecting legitimate business interests, such as client connections, confidential information or goodwill, may be enforceable if they are sufficiently specific, reasonable in duration, and proportionate to the employer’s interest.

However, the existing judgments have been issued only at first-instance level, and there is currently no Appellate or Supreme Court authority providing definitive guidance on the validity of traditional post-termination non-compete clauses in Cyprus. As a result, the legal position remains unsettled: while the general presumption under the Contract Law creates a strong bias against broad restrictions, the precise limits of what may be enforceable have not yet been clarified by higher courts. Employers who seek to rely on post-termination restrictions therefore face a real risk that a court may treat such clauses as unlawful restraints of trade.

4. Common-Law Guidance on Post-Termination Restraints

In light of the uncertainty surrounding the enforceability of post-termination non-compete clauses in Cyprus, it is often helpful to consider how other common law jurisdictions treat such restrictions. Cypriot courts may, in time, draw on comparative reasoning when the issue reaches appellate level, particularly given the shared legal heritage with other common law systems.

Indian contract law contains a provision materially identical to Cyprus’ Section 27 of Cap.149, and Indian courts have consistently interpreted it literally and strictly. The result is for post-termination non-compete clauses to be generally treated as void, regardless of their scope, duration, or the seniority of the employee. This approach represents the most restrictive end of the spectrum among common law jurisdictions.

Unlike India or Cyprus, England and Wales have no statutory framework regulating non-compete clauses. Instead, the enforceability of post-termination non-competes is governed by common law principles. In England and Wales, reasonableness is assessed case by case, and any restriction exceeding what is necessary will be held unenforceable by Courts.

The onus rests on the employer to demonstrate that a non-compete clause is reasonable in its scope, duration and geographic reach. Indicative case law suggests that courts will uphold such clauses only where the employer can establish that:

• the clause protects a legitimate business interest, such as confidential information, trade secrets, or client relationships;
• the restriction is reasonable in terms of scope, duration, and geographic reach;
• less restrictive alternatives (such as confidentiality or non-solicitation clauses, or garden leave) would not adequately protect the employer’s interests; and
• the clause is not contrary to public interest.

Even so, post-termination non-compete clauses have been described as the most powerful weapon in an employer’s armoury, and Courts apply close scrutiny to ensure that restrictions are no broader than strictly necessary.

Legislative change also appears likely, as the Department for Business and Trade has published a working paper outlining options for reforming non-compete clauses in employment contracts. The proposals contained in the working paper reflect an intention to put forward legislative limitations to the use of non-competes in employment relationships, in order to reduce barriers to job mobility and foster innovation.

5. Our Firm’s Assistance

For businesses operating in Cyprus, especially those with cross-border exposure, sensitive intellectual property or business interests and complex workforce structures, these uncertainties pose real legal and commercial risks.

At Economou & Co LLC, we have substantial experience advising both employers and senior employees on restrictive covenants, confidentiality obligations, post-employment obligations and employment-law disputes. Our work spans both contentious and non-contentious matters, including the drafting of tailored, defensible clauses, the assessment of enforceability risks under current law, and the design of alternative protective mechanisms.

Further employment law publications from Economou & Co LLC:

Comprehensive Guide for Employment Agreements in Cyprus for ICT and Fintech Companies

Comprehensive Guide to the Termination of Employment in Cyprus

EU Pay Transparency Directive: Implications for Employers in Cyprus

Springboard Injunctions: Protecting Businesses from Unfair Competitive Advantage

Trade Secret Protection in Cyprus: Framework, Remedies, and Best Practices

Digital Nomads in Cyprus: A Comprehensive Guide

Cyprus Guide to Temporary Work/Residence Permits for Third-Country Nationals / Employees at International Companies