Non-compete Croatia rules: restraints, IP and inventions for your staff

Croatian law treats competition during employment and competition after it as separate questions, and only the first comes free. While the contract runs, the Labour Act (Zakon o radu) itself forbids an employee to carry on business in competition with the employer without permission (Art. 101(1)). You do not need a clause for that; it applies to every Croatian employment contract.

The second restraint, the post-employment non-compete, exists only if someone writes it down and pays for it. Croatian lawyers call it the ugovorna zabrana natjecanja, a contractual ban on competition, and Arts. 102 to 106 of the Labour Act control its length, its price and when it falls away. A clause that ignores those articles reads as protection on paper and gives none in court.

This split matters for foreign companies used to a one-line restrictive covenant in an offer letter. In Croatia, the restraint after departure is a bargain with a cost attached, and the employer has to keep paying for it month by month. Budget for it like a salary line, not like boilerplate. And if you are relaxed about a person running a side business that does not compete, say so in writing: the in-employment ban turns on the employer’s permission, so a clear yes or no avoids an awkward dispute later about what was tacitly allowed.

A post-employment non-compete binds only if it is in writing, lasts no more than 2 years from the end of employment, and is paid for. Arts. 102(1), (2) and (4) set the form and the ceiling, so a three-year restraint copied from a group template will not survive as drafted.

Two groups of workers cannot be bound at all. The clause is void if the employee earns less than the average Croatian wage on the day it is agreed, and it is void for a minor (Art. 102(6)). Check the current published average before you add the clause to a junior role; if the salary sits below it, the restraint achieves nothing and only invites argument later.

Even for a well-paid hire, the clause must protect a legitimate interest of the employer and must not restrict the person out of proportion to that interest (Art. 102(5)). A sales engineer barred from every technology company in the country for two years is a harder case to defend than one barred from approaching a named list of direct competitors for twelve months.

• written agreement, signed with or after the employment contract
• restraint of 2 years at most after the employment ends
• salary at or above the Croatian average wage when signed
• scope tied to a real business interest: sector, clients or territory
• monthly compensation of at least half the employee’s recent average pay

The employer must pay compensation of no less than half of what the person earned on average across the final 3 months of the job, for every month the restraint runs, paid monthly, each payment falling due by the 15th (Art. 103(1) and (2)). Without that payment, the employee is not bound.

Take a hire on €3,500 gross a month, the salary we use in our Zagreb cost example. A 12-month restraint costs at least €1,750 a month, or €21,000 over the year; the full 2-year maximum doubles that to €42,000, the same as a year’s gross salary. Our arithmetic, and only a floor: the parties can agree more.

For workers paid above the average wage, Art. 106 allows a contractual penalty (ugovorna kazna) for breach and, for that higher-paid group, lets the parties agree the penalty in place of the monthly compensation (Art. 106(1) and (3)). That route needs careful drafting by Croatian counsel, because a court will read it against the employer if the wording is loose.

Before you sign one, decide whether you will actually enforce it. If a departing developer joins a direct rival and you would not sue, the compensation is money spent on a deterrent nobody believes in. A tighter confidentiality clause and good IP terms often protect more for less, which is why many clients of Employer of Record Croatia skip the non-compete for most roles and keep it for senior sales and leadership hires.

You can walk away from the restraint, but not instantly. Under Art. 105 the employer may waive the ban in writing, and the compensation stops three months after that notice. Plan the waiver early: sending it on the employee’s last day still leaves three months of payments to make.

The restraint can also lapse without anyone choosing it. If the employer dismisses the person without a justified reason, the non-compete falls away unless, within 15 days, the employer confirms in writing that it will pay the compensation (Art. 104(2)). Dismissal disputes and non-competes are therefore linked; our guide to ending employment in Croatia covers the grounds that count as justified.

When a role changes, revisit the clause. A person promoted into a client-facing post may now be worth restraining, while someone moved into internal operations may not. Amending the clause is a contract change, so it needs the employee’s written agreement.

Where the contract is signed by an employer of record, the non-compete sits in a contract between the employee and the EOR, but the interest it protects is yours. The clause should name your business, your clients and your sector, not the EOR’s, or a court may find it protects nothing the employer actually has at stake.

The compensation follows the same logic. The EOR, as employer, pays the monthly amount under Art. 103 and recharges it to you, so agree up front that the restraint payments will appear on your invoice for as long as the ban runs. Treat a two-year restraint as a two-year commitment that outlives the employment itself.

Decisions about waiver should also come from you. Only you know whether a departing person is a genuine threat, so set a simple rule with the EOR: who decides, by what date, and in writing. Missing the moment can cost three months of compensation for a restraint nobody wanted.

None of this changes the Labour Act tests, which apply exactly as they would to a Croatian company employing the person itself. Before an offer goes out, check the draft against these points:

• Would confidentiality and non-solicitation terms protect the role well enough without a restraint?
• Does the salary clear the Croatian average wage today, so the clause is not void from the start?
• Is the restraint 2 years or less, with a defined sector, client group or territory?
• Is monthly compensation of at least half the 3-month average pay written in?
• Do the IP terms pass copyright, software and invention rights through to your company?

Agree these clauses in the same signing round as pay and probation; raising a restraint months after the start date gives the employee a reason to ask for more. Our overview of Croatian employment contract rules covers the compulsory content around them, and the piece on how an EOR works in Croatia lists the other decisions that stay with you for the life of the contract.

Copyright in work created in employment passes to the employer to the extent its business needs, without limit in place or time, unless the contract says otherwise. The rule sits in the Copyright and Related Rights Act (Zakon o autorskom pravu i srodnim pravima), Art. 100(1) and (2), and those rights stay with the employer after the person leaves.

Software is treated more firmly. Where an employee writes a computer program in the course of their duties, the employer holds all exclusive exploitation rights without limitation, again unless the contract provides otherwise (Art. 100(6)). For most engineering hires the default already gives the employer what it needs.

Pay is presumed to cover the author’s remuneration. A separate payment is owed only if the parties agreed one and the work contributed substantially to the employer’s profit (Art. 101(1) and (2)). Avoid promising royalties or revenue shares casually in a hiring chat; that is exactly the kind of agreement Art. 101 picks up.

On an EOR hire, two companies are involved: the one named on the Croatian contract and yours, which actually uses the output. The statutory default vests rights in the EOR as employer, so the contract has to carry everything the employee produces over to your company. Ask to see that clause before the first commit lands; it belongs on the list in our article on choosing an EOR for Croatia.

An invention made at work or in connection with work belongs to the employer, and the employee must report it and keep it confidential (Labour Act Art. 98(1) to (3)). Patentable ideas from a Croatian R&D hire therefore start life as employer property, with no transfer step needed between the person and the employer.

The inventor is still owed something. Art. 98(5) gives the employee a reward, set by agreement or, where the parties cannot agree, by a court. A short invention-reward policy agreed in advance, with a formula or at least a process, keeps that question out of litigation. Engineers moving from start-ups often expect one, and it costs little to write.

Ideas the person develops outside work but which relate to the employer’s business sit in between. Art. 99 requires the employee to offer such an invention to the employer, which then has one month to say whether it wants it. If it declines or stays silent, the employee may exploit it.

Patent filings themselves run through the State Intellectual Property Office (DZIV), which publishes its procedures at dziv.hr. As with copyright, an EOR hire needs the invention rights passed on to the company that will file and use them.

Q01Will a Croatian court hold my employee to a non-compete?+

A.Yes, if they meet the Labour Act conditions: written form, a restraint of no more than 2 years, compensation of at least half the employee’s recent average pay paid monthly, and a salary at or above the Croatian average wage when the clause is agreed. A clause that protects no legitimate interest or restricts the person disproportionately does not bind.

Q02Can I add a non-compete without paying compensation?+

A.Generally no. For every month the restraint lasts, the employer must pay no less than half of what the employee earned on average in their final 3 months; without that payment it has no binding force. For employees above the average wage, a contractual penalty may be agreed in place of compensation, which needs careful drafting.

Q03If a Croatian employee writes code, who holds the rights?+

A.Under the Copyright and Related Rights Act, the employer holds all exclusive exploitation rights in computer programs written in the course of the employee’s duties, unless the contract says otherwise. With an EOR, the contract should pass those rights on to your company.

Q04Does a Croatian employee get paid for an invention?+

A.Yes. Inventions made at work belong to the employer, but the employee is entitled to a reward set by agreement or, failing agreement, by a court (Labour Act Art. 98).

Q05Can I cancel a non-compete when someone resigns?+

A.You can waive it in writing, but compensation continues for three months after the waiver notice. Waive early if you know you will not need the restraint.