Non-competition clause: what does that mean for you?
March 18 2021
Are you planning to take on a new challenge soon? Then a competition or relationship clause can throw a spanner in the works. Employers sometimes include this in an employment contract if they do not want employees to take their knowledge, experience or relationships with them to the competitor after an employment contract. What exactly does such a rule entail, and what are the possible consequences for you?
What is a non-competition or relationship clause?
Your employer includes a non-competition or relationship clause in your employment contract to prevent you from strengthening the competitor after your employment. For example with the knowledge, experience and relationships that you have acquired with your current employer. Both clauses therefore only come into effect when you leave the company. The provision often states something about the duration, activities and place (s) to which it applies.
When is such a clause legally valid?
A non-competition or relationship clause is legally valid if it has been agreed in writing and if you were an adult at the time of signing. It must be a contract for an indefinite period. In temporary employment contracts it is not allowed, unless the employer has substantiated and motivated properly that there are compelling interests to include it. The clause is usually included in your employment contract. But it may be that your employment contract refers to a company regulation or manual. We can check for you whether your employer can comply with your non-competition or relationship clause.
Employment contract for an indefinite period / fixed period
With an employment contract for an indefinite period, an employer has no obligation to state reasons. This means that an employer in a non-competition or relationship clause does not have to indicate in this case why the clause is necessary. This is different for a fixed-term employment contract: there is a duty to motivate.
In a motivation, your employer can indicate that a non-competition or relationship clause is necessary because important business or service interests are at stake. For example, if you have specific knowledge or company information, as a result of which your employer is disadvantaged if you switch to a competitor or a relationship. There are high requirements for such a statement of reasons. If there is no motivation at all for a fixed-term employment contract, the non-competition or relationship clause is null and void.
A penalty provision is often linked to a competition and relationship clause. If you violate the stipulation, the employer can demand a fine. These are often heavy fines. These fines can sometimes be moderate by the judge.
Are you about to sign a new employment contract? Then it is useful to have the employment contract tested by us before you sign it, so that you know in advance where you stand. We can also check whether the clause is not too strict, which limits your future chances on the labor market. Whether you as an employee are bound by a non-competition or relationship clause partly depends on the circumstances. Does this play? Then contact us.
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