Enforcing Non-Competes in Brazil

Non-compete agreements are standard in employment agreements these days. Whether in the United States or Brazil, the last thing you want is your newly trained executive to run off and help a competitor. But are non-competes legal?

Although there’s no specific legislation governing non-compete clauses and non-compete agreements in Brazil, they’re regularly used. Most often we see them in the employment context. And labor courts routinely recognize their validity so long as they’re reasonable. And that’s the key: reasonableness.

Brazilian courts will look at a non-compete holistically. Is it limited to a specific geographic location? Is it applicable for a finite period of time? Is the scope narrowly tailored? Is there a payment or benefit in return for the restriction? Does it clearly define what activities constitute competition? These are just some of the factors that courts will consider.

So what’s market today? A two to five year non-compete is generally accepted. Anything longer is certain to garner additional scrutiny. In terms of financial compensation, there’s no hard-and-fast rule. Every case is different, but it should be proportional to the restriction imposed. It’s also not uncommon for parties to stipulate a fine in case of a breach.

While a non-compete can’t restrict someone from working, limitations on activities that compete with the legitimate business interests of the employer are valid. This is particularly true when the employee is privy to the company’s confidential information. To be enforceable, non-competes should be specific, reasonable, and limited in time, location, and scope.