Penalty clauses
It is advisable to link a non-compete clause to a penalty clause so that fines are forfeited immediately in the event of infringement. There is a lot of case law about the height of the fine and the possibility for the judge to moderate it. Of course, we can help you formulate the penalty clause.
Weighing of interests
In principle, a non-compete clause applies if agreed upon: a deal is a deal. An employee will have to respect the non-compete clause and will forfeit the agreed fines in case of violation. However, the law states that a judge may – at the employee’s request – annul a non-compete clause in whole or in part. Partial nullification may involve, for example, shortening the duration of the non-compete clause (e.g. from five years to one year) or restricting its geographical scope. The court will have to weigh the interests involved. The employer will have an interest in protecting the trade secrets and its competitive position as well as possible. The employee’s interest will often lie in the fact that he will be disadvantaged by the clause in finding other work.
It is also important to formulate the non-compete clause as clearly, precisely and concretely as possible. It should be clear to the employee to whom, to what extent and for how long the clause applies after termination of employment. It follows from case law that ambiguities are often at the expense and risk of the employer.
Job changes
In addition to a good and clear motivation, it is good for the legal validity of the non-compete clause to be mindful of interim job changes. If an employee’s job changes during the course of the employment contract are of such a far-reaching nature that the non-compete clause already agreed upon will be considerably more onerous, such a clause will have to be agreed upon again (unless the change was foreseen at the time of entering into the employment contract). Failure to do so may result in the non-compete clause losing (part of) its effect.
Unlawful employee competition
Where no non-compete clause has been agreed, the starting point is that a former employee is free to compete with his former employer. Only in the case of unlawful employee competition such is not permitted and an employee can be held liable for this. Unlawful employee competition exists if:
- The employee has interrupted the ‘sustainable business flow’ of his former employer;
- The deterioration is substantial and has taken place systematically;
- The deterioration has taken place on the basis of knowledge and data that the employee obtained from his former employer.
It is up to the former employer to prove the above.
Non-solicitation clause
In addition to a non-compete clause, the employment contract often includes a non-solicitation clause. Such a clause restricts an employee from working (directly or indirectly) for clients of the employer. A non-solicitation clause is subject to the same conditions as a non-compete clause. A non-solicitation clause is therefore also not valid if it is included in a fixed-term employment contract, unless a justification is included. Furthermore, a non-solicitation clause in an employment contract for an indefinite period of time must have been entered into in writing with an adult employee.
Finally
Motivating and drafting a non-compete clause in the employment contract requires careful attention. The employment law team of Valegis has extensive experience in drafting non-compete clauses and/or handling disputes in this respect. If you have any questions about this, they will gladly help you.
