Should I refrain from preparation for self-employment in my employment contract?

Question

I have very nice job opportunity in Berlin-based startup. I really like the product, the team and my responsibility in the company. I've already accepted the offer and couple days ago I've received the employment contract, where it states:

During the term of the employment relationship, the Employee undertakes to refrain from carrying out any activities which could be aimed at assisting him in preparing himself for possible self-employment.

I've asked my potential employer about it and he verified this means I'm not allowed to work on side projects, commercial or even non-commercial which might become commercial later on. The reason given for this is that company wants to have employees fully focused and rested for their employment. It was offered to me verbally that I can always ask for permission to start work on my side projects.

I feel this might limit my freedom and it might be bit uncomfortable to ask for permission about my every side project.

Is this legal? Is it common for startups or for German companies somehow?

Answer 1

I can't speak as to what is legal in Germany - others may better advise you in that regard - but generally speaking, if you sign the contract, you are legally bound by it.

At this point you should look at the situation with the assumption that they are within their legal right to ask that of you. The question is:

How much will that clause affect you?

Are you the kind of person who works on contracts on the side?

For example, I've worked as a developer for 3 years, and I have never done any contract work - I wanted to focus on my friends/family/hobbies when I got home after 8 hours at my desk. But many of my present and former co-workers did quite a bit of work on the side. One of them went into business for himself. Do you posses that sort of entrepreneurial spirit?

If you are, then this may not be the job for you.

The implications

I've read a number of articles recently to the effect that in Germany employers are not allowed to contact employees after work hours, etc. Sounds nice. However, if you read between the lines of that contract clause it sure sounds to me like they're trying to dictate the terms of your personal life. I would be very wary of that.

If you go home after 8 hours of doing good work for them, why does it matter if you chill in front of the TV, or work on a personal project? Most likely these guys don't want an employee getting an idea tangent to their business, going "rogue", and becoming their competition.

You may have no intention of doing that, but are you willing to allow your hands to be tied in the name of their peace of mind?

Workaround

Also consider the fact that you don't have to tell them everything you do. If you put up/maintain a few websites and get paid a few bucks on the side no one's going to know - personally I wouldn't even tell them. However, you would be doing so at the risk of being terminated if they do find out - again, how much does this matter to you?

Conclusion

Consider anything you sign to be legally binding. If you value your "freedom" as a freelance developer then this job does not sound like the best choice for you. Do you want to ask your boss's permission to take a contract on the side?

On the other hand, if the job pays very well, and/or is a good learning opportunity, then maybe putting aside any personal project for a while is a net benefit after all.

Answer 2

Is this legal? Is it common for startups?

The phrase:

During the term of the employment relationship, the Employee undertakes to refrain from carrying out any activities which could be aimed at assisting him in preparing himself for possible self-employment.

is very common (I'm speaking from the perspective of Indian startups and companies, not sure about the rest) amongst companies and startups in India on the offer letter.

But, it only means that you cannot pursue side-projects like freelancing, etc; which can deter your focus and productivity at work. However, it rarely implies to personal and open-source projects (if that's what you mean by side project)

So, for such projects, you don't need any permission as far as if it does not affect your productivity at work.

For all others, like freelancing, consulting, etc; you need to seek permission.

Answer 3

Do they have something in the contract that prevents me from cutting the grass in my garden, since I might not be fully rested after the weekend?

It might be illegal. But then you'd only find out after going to court. Everything depends on your situation. If you can find a job elsewhere, do so. Or tell them that these terms are unacceptable. I mean were I work, everything I do for my company could be aimed at assisting me to prepare myself for possible self-employment. Going to workplace.stackexchange.com would be out, because there are lots of questions that could assist you to prepare yourself for possible self-employment. You wouldn't be allowed to add any new knowledge, since any new knowledge could assist you to prepare yourself for possible self-employment.

AndreiROM said "Do you want to ask your boss's permission to take a contract on the side?" But it's worse than that. In Britain, I wouldn't be allowed to go to the HMRC website and check out how self-employed people are taxed, according to this contract. They don't want to allow you to do anything that improves your professional situation. According to this contract, you wouldn't be allowed for example to discuss with me the pros and cons of being self-employed, on a Saturday in the pub. You wouldn't be allowed to talk to anyone who offers you work as a self-employed person.

PS. After thinking a bit more about it: I'd be quite sure that these terms are illegal, because they are directly trying to prevent you from working anywhere you like in Germany or in the EU after you leave this employment, which is one of your basic rights. It's like putting in your contract that you are not allowed to look for a job elsewhere while you are employed (which when successful means you give your notice and go somewhere else, not that you take on a second job).

I'd advice them that you believe these contract terms are illegal because they are much too far reaching and hindering you in working elsewhere in the future, and that they should first ask a lawyer about them, that you aren't going to sign a contract with illegal terms, and that you want them to change these terms. Chances are that any lawyer looking at the contract would start laughing. Or crying.

Answer 4

A little bird tells me that in the EU, such exclusivity contracts are not the norm and are unenforceable. However, if you're working on something that is discernable by an average person to be competition to your contract, then you have a problem. This is, after all, what they're trying to prevent. If you are, for example, working for this company building a social media chatting app, then if you do side-work building a social media app, you're in shaky ground. If, however, you're working on the side building a medical diagnosis app, you likely have no exposure. In the EU, and more and more by baby steps in the USA, the idea of "restraint of trade" among employees is re-gaining foothold.