Where is the boundary? ‘Smart working’ and the territorial scope of Italian non-competes

Elena Ryolo
Cappelli Riolo Calderaro Crisostomo Del Din & Partners, Milan
elena.ryolo@crccdlex.com

Introduction

Every post-employment non-competition covenant reflects a negotiation between two interests that do not easily coexist. The employer wants to protect what they have built: client relationships cultivated over years, confidential strategies, market knowledge, industrial and commercial secrets that may walk out of the door when a senior employee does. Employees want to remain fully employable in the field they know. Italian law mediates this tension through Article 2125 of the Civil Code. It makes the validity of any non-competition covenant conditional on specific requirements: it must be in writing; the restriction must be bounded within pre-defined limits for object, duration and territory; and the employee must receive adequate consideration in exchange of such limitations. Fail to uphold any one of these, and the agreement is void in its entirety and unenforceable.

For most of the history of this provision, which dates back to 1942, the territorial requirement was relatively manageable. An employer identified a geographic area, the restriction applied within it, and disputes turned on whether the perimeter chosen was proportionate or considered excessively broad. What has made this harder is the same technology that has reshaped professional work generally. A senior professional who resigns on a Friday can in principle, by Monday morning, be managing the same client relationships from a home office in a different country and on behalf of a competitor, communicating by the same digital channels, producing the same competitive effect/damage, without having crossed any border that the non-competition clause actually covers.

The evasion scenario is not hypothetical. An employee whose non-competition covenant is territorially limited to Italy can be formally employed outside of Italy and make the full benefit of years of Italian client relationships available to a competitor, then return to the Italian market once the restriction period expires. Nothing in the agreement as written prevents this. The employer’s protection evaporates not because the agreement was breached but because its geographic scope was too narrow for the world in which work now happens.

A tentative remedy to this risk is known as the remote working clause (clausola di remotizzazione): a provision that extends the territorial prohibition beyond the place where the activity is physically performed to wherever it produces its effects, regardless of the employee’s location. The commercial rationale is sound. Whether the standard formulation of this clause survives judicial scrutiny is – as two decisions of the Milan court issued in 2026 make plain – an open question which practitioners would be unwise to treat as settled.

The legal framework: Article 2125 of the Italian Civil Code

Article 2125 of the Italian Civil Code provides that a post-employment non-competition covenant is void: if it lacks written form; if the restriction is not contained within pre-defined limits of object, duration and geography; and if no adequate consideration is agreed in the employee’s favour. These conditions are mandatory and cannot be varied by agreement between the parties. For managers the maximum permitted duration is five years, and three years for other employees.^[1]

The consequences of failing any one of them are absolute. Unlike the general rule of Article 1419 of the Civil Code, which ordinarily upholds the rest of a contract when a single clause is defective, Article 2125 provides that the indeterminacy of the territorial limit – like the indeterminacy of the restricted market or the absence/inadequacy of consideration –  produces the nullity of the entire agreement, with no power in the court to substitute a proportionate restriction or to strike out the offending clause (Supreme Court, n 10679/2024). The territorial limit must also satisfy a prospective clarity standard: assessed at the moment of signing, not retrospectively; it must give the employee a reliable picture of what future employment the agreement prohibits, since it is the basis on which they are taken to have consented to the restriction (Supreme Court, n 13050/2025).

The remote working clause: purpose and contents

The formulation usually included in non-competition covenants for managers with international responsibilities acknowledges that at this present time, technological instruments allow full remote work, and specify that therefore the covenant’s geographical limits are to be intended as both: (1) the territory where the employee cannot physically work; and (2) the place where the employee’s activity cannot be used or produce competitive effects, even if performed from outside.

This means that, if a covenant applies to Italy, the employee cannot work for a competitor in Italy, but not even in France or other bordering countries or elsewhere if their activity (eg, in terms of know-how of the Italian market and clients) ultimately produces competitive effects in Italy.

Italian case law on these contents is divided. A number of courts have upheld such clauses as valid responses to the evasion risks. Courts sitting in the favourable current have consistently recognised that a non-competition covenant limited to a fixed geographic perimeter is too easily defeated in a world where professional activity can be performed and its competitive effects felt in entirely different jurisdictions. On this view, the territorial concept in Article 2125 should not be read as a physical boundary for the employee’s desk, but as the market in which the former employee’s activity produces its competitive impact – a reading that a number of decisions have described as consistent with the Supreme Court’s own evolving approach to territorial limits in light of modern working practices.

As explained in more detail below, the two March and April 2026 decisions from the Milan Court instead took a more strict view, and found that reference to where the activity may be ‘used’ or its ‘produce effects’ is excessively generic, preventing employees from understanding the geographical scope of the restriction at the time of signing. According to the Court, the unlawfulness of remote working clauses renders the entire covenant null and void, as Italian law requires that the geographical scope be determined at the time of signing.^[2]

The two Milan decisions

Milan Labour Court, Case No 1402/2026, 17 March 2026

The first decision arose from a challenge filed on 2 February 2026 against an injunction that a bank had obtained on 19 January 2026 to enforce a non-competition covenant against a former employee.^[3] The agreement banned the employee from working for competing financial institutions for 18 months. Such institutions were defined to include banks, securities firms, asset management companies, insurance companies, investment firms and any other entity competing with the bank, in any capacity whether employed or self-employed, occasional or gratuitous.

The Court found the agreement void on two grounds, one of these relating to the remote working clause. The agreement’s stated territorial limit was the Lombardy region. The clause then extended it to cover the working activity, irrespective of whether it was carried out in Lombardy, insofar as such activity was ‘used in whole or in part’ or produced ‘effects’ in that region. The court did not reject the anti-evasion logic: remote working clauses serve a legitimate purpose and are not unlawful as such. What this clause failed to do was give the employee any workable understanding of what employment it would actually catch. The phrase ‘used in whole or in part’ resists interpretation on its own terms. More critically, the bank’s registered office and most of its operational centres were in Lombardy. Under the clause as written, any employment anywhere in the world that had even the loosest functional connection with any Lombardy office or resource would in principle be caught. According to the Court that is not a territorial limit but a ban without geographic bounds. The covenant was consequently considered null and void.

Milan Labour Court, Case No 2646/2026, 2 April 2026

A different panel of judges of the same Court reached the same result two weeks later, on a non-competition covenant with more attention to territorial specificity.^[4] The restriction covered Switzerland, Luxembourg, and the Italian regions of Lombardy, Piedmont and Emilia-Romagna, with an additional provision extending coverage to whichever Italian region had been the employee’s most recent workplace if that assignment had been made within the previous two years. The remote working clause then extended this defined territory to wherever the activity could be performed, utilised or produce its effects, irrespective of physical presence or the location of the competing employer.

The Court openly acknowledged the split in judicial opinion on remote working clauses and noted that cases had been decided in both directions. It nonetheless concluded that this clause does not comply with Article 2125. The Court held that the reference to wherever the activity ‘can be utilised’ was not readily comprehensible, since the concept of utilisation was not explained in the covenant and, above all, the references to the ‘effects’ of the activity and their production ‘in whole or in part’ were found too diffuse to give the employee any reliable sense of what future roles would fall within the restriction. A territorial limit that cannot be determined is, according to the Court, no limit at all.

Implications and practical suggestions

The enforceability risk attached to remote work clauses is now documented in two recent decisions of the same Court, and organisations should not disregard it. The appropriate response will differ from one company to the next, depending on the profile of the workforce and management, the contents and strategic importance of the covenants in force, and the degree of risk each employer is prepared to carry.

For employers with covenants that are strategically critical, those where a declaration of nullity would cause significant commercial damage, or where the likelihood of a challenge is elevated, the most prudent course is perhaps to review and amend them now. For existing covenants where the risk of evasion through relocation is lower because the employee is, for personal or professional reasons, unlikely to work internationally, a more calibrated approach may suffice.

Employers who choose to maintain their current clauses unchanged retain a line of argument. The favourable current of Italian case law, which treats the territorial concept in Article 2125 as the competitive market in which the former employee’s activity produces its effects rather than a rigid geographic perimeter, has not been overruled and remains a soundly reasonable argument of defence in any future litigation.

Conclusions

Remote working clauses fill a genuine gap in post-employment protection, and Italian courts have not said otherwise. What the Milan court said in March and April 2026, with careful attention to the text of the clauses before it, is that the standard market formulation does not actually set a real territorial limit, and this has an impact on the validity and enforceability of the entire covenant.

However Italian case law on this point has not yet reached a settled position, and courts have continued to issue decisions in both directions through the opening months of 2026.

Faced with this uncertainty, Italian employers may also consider valid alternatives to non-competes to protect their know-how and client base including, by way of example, strong and well-drafted confidentiality and non-solicit covenants. In this connection it is worth noting that the Italian Court of Cassation clarified (although there is just one decision to our knowledge) that a non-solicit covenant is something different from a non-compete and does not need to meet the statutory requirements for non-competes, including the payment of a specific remuneration.^[5] Contractual instruments which: (1) emphasise and somehow broaden the employees’ statutory duties not to divulge secrets and confidential information post-termination; (2) impose non-solicit obligations, including with respect to clients; (3) introduce liquidated damages clause as a deterrent; although leaving employees freedom to join a competitor may in some cases be sufficiently protective of company know-how.

Notes