A non-compete clause in an employment contract

A non-compete clause prevents an employee from working for a competitor after his/her employment has ended. In today’s tight labour market, many employers use non-compete clauses only to prevent employees from leaving the company. Usually the employee is not happy with a non-compete clause, but signs the employment contract anyway. Often out of fear of losing the position or damaging the relationship with his/her new employer.

The consequences of a non-compete clause can be far-reaching for the employee. Violation of the clause can lead to very high penalties. For this reason, the law imposes conditions on agreeing to a non-compete clause. For example, a valid non-compete clause must be agreed in writing with an adult employee. The law distinguishes between non-compete clauses in temporary contracts and contracts for an indefinite period.

Employment contract for a definite period

There have been set stricter requirements for agreeing to such a clause. This is done in order to prevent a temporary employee from being bound by a non-compete clause too easily. Does your temporary contract include a non-compete clause and was it concluded on or after 1 January 2015? Then the clause is invalid unless the reasons are explained. The employer must have compelling business interests to include a non-compete clause in a temporary contract. And it must explain the reason for these interests in the clause.

There is a very strict requirement to explain the reasons: the courts will not accept generally formulated business interests. The employer is required to customise its business interests specifically to the work performed by the employee. This means that the employer must make a specific assessment of the necessity for a non-compete clause in each individual case. This necessity must exist not only at the time of entering into the non-compete clause, but also when the employer invokes the clause.

In the case of an employment contract for a definite period, the written reasons for the non-compete clause determine whether the employer may apply the clause.

Employment contract for an indefinite period

The requirement to give reasons does not apply to a non-compete clause in an employment contract for an indefinite period. However, an employee may request the suspension of a non-compete clause if his/her choice of employment is disproportionately affected by the clause. The employer’s interests in enforcing the non-compete clause are then compared with the employee’s right to work for the company of his/her choice. Therefore, even in the case of an employment contract for an indefinite period, the employer is still required to provide reasons for a non-compete clause. The difference with a temporary contract is that the employer is not obliged to provide reasons for its interests in the clause.

Do not automatically agree to a non-compete clause

Strict conditions therefore apply to agreeing and enforcing a non-compete clause, especially in the case of temporary employment. It is not uncommon for courts to suspend a non-compete clause afterwards, although the clause had been validly agreed. Nevertheless, it is unwise to automatically agree to a non-compete clause. After all, nobody benefits from a discussion afterwards about its validity and scope. Moreover, as an employee – if your employer claims the agreed penalty from you – you will have to go to court yourself to have the clause suspended. This is costly and time-consuming, while you may have already found new employment and want to start soon.

Negotiating your non-compete clause

Before signing a non-compete clause, it is advisable to be aware of the consequences of doing so. This applies not only to an employment contract for a definite period, in which your new employer has not formulated which business interests make the clause necessary, but also to an employment contract for an indefinite period. If the clause seems too vague or general to you, or if the term is too long, you should have the clause checked by an employment lawyer. It may be possible to have the clause removed from the employment contract or to have its term and scope adjusted.

Have you agreed to a non-compete clause and you want to make the move to a potential competitor? Then you should obtain legal advice to assess your options. A lawyer can advise you on negotiating with your employer to have the clause removed or amended.

More information

Do you have any questions about a non-compete clause? Then please do not hesitate to contact me.