Non-Compete Clauses in an EOR Setup
When hiring through Remote People as your Employer of Record (EOR), it’s natural to want to protect your business interests, especially for key roles.
A common question is whether non-compete clauses can be included in employment contracts. In an EOR setup, these clauses are generally not enforceable.
What is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party organization that legally employs talent on your behalf.
With Remote People:
You manage the employee’s day-to-day work
We handle employment contracts, payroll, benefits, and compliance with local labor laws
This allows you to hire internationally without setting up a local legal entity. However, because Remote People is the legal employer, this impacts what can be included in the employment contract.
Why non-compete clauses don’t apply
A non-compete clause is designed to prevent an employee from working for a competitor or starting a similar business after leaving a role.
For a non-compete to be enforceable, it must:
Protect the legal employer’s business interests
Be reasonable in scope, duration, and geography
In an EOR model:
The employment contract is between the employee and Remote People
Your company is not the legal employer
Because of this:
Only Remote People can include enforceable post-employment restrictions
Restrictions aimed at protecting your company’s competitive interests are not legally valid in this context
Example
If your company operates in the pharmaceutical industry and you want to prevent an employee from joining a competitor:
The employee is legally employed by Remote People, not your company
Remote People does not operate in the pharmaceutical industry
As a result, a non-compete clause tied to that industry would not be enforceable, as it does not protect the legal employer’s business interests
Key takeaway
Non-compete clauses are generally not compatible with the EOR model due to the separation between the legal employer and your business.
If you’re looking to protect sensitive information or business relationships, alternative measures (such as confidentiality or non-solicitation clauses) may be more appropriate, depending on local laws.
For guidance on compliant contract terms, our team is happy to support you.