The ideas concerning the non-competition clause are just as widely different as the underlying interests of employers and their 
(ex)employees. What is a clause like that even worth it, for instance, a top salesman or financial manager switches over to the competitor?
There are a lot of misunderstandings between employer and employees about how the non-competition clause actually works. According to some people, it is a worthless clause because (in the end) it cannot be enforced. Other overestimate the capability of the clause and think a non-competition clause will always prevent an (ex)employee from doing the same work for the competitor. Both of these views are incorrect, says lawyer Maarten van Essen of Wille Donker lawyers. Wille Donker lawyers work with many people in the fresh produce industry in the area of (international) commercial law, privacy law, environmental law and also labor law.
Increasing interest
There is a shortage in the labor market. “We see that – especially in the fresh produce industry – the mobility of employees between competing companies is increasing. This also marks an increase in the need for well-made agreements that take effect after the termination of the employment contract”, says Maarten. “We know from experience that in most cases not a lot of thought is put into whether or not to include a non-competition clause in the employment contract. The clause functions as a kind of general condition that is included in every standard employment contract. This is not a smart thing to do though, there is a lot of criteria for such clauses. Logically speaking, it limits the employees' options and in most cases, high fines are given if the rules aren’t followed. So it is best to tailor fit the clauses. This increases the effectiveness and enforceability of the clause. It is good to think about which interests need to be protected when agreeing to any sort of employment contract depending on the type of job it entails and if it is even needed to have this type of clause in the first place. More often than not, clients request assistance in this process. Our bottom line is: shoot sharp, not with buckshot because there are multiple types of agreements to protect commercially sensitive corporate information and customer relations.”
Clear and reasonable
The most excessive form of that is the non-competition clause. Maarten: “A clause like that prohibits the ex-employee from taking part in competing activities for a certain time after their employment has ended. Formulate clearly and choose a reasonable period (which is usually one or two years at the most). Don’t make the provisions unnecessarily broad: limit the clause geographically or product-based. Very focused and motivated due to the protection of the employers best interest and nothing more than that. And remember to only use the clause in employment contracts for an indefinite duration. The effective inclusion of such a clause in an employment contract for an indefinite duration is virtually impossible: the hefty business interest (which needs to be defined in writing) is in reality almost never accepted by judges. An example of this is the recent court decision made by the Central Netherlands court on the 6th of February last year. It declared a non-competition clause in a fixed-term contract null and void because the motivation for doing so was too general and did not show any individual consideration of interests. The critical judgment was also understandable: most of the time it involves short-term employment in which case the employee has little to no opportunities to amass commercial staying power. In this case, the risks for the employer are minimized. The same high threshold is in place when including a relationship clause in a fixed term contract.”
20.000 euro fine
With the inclusion of a relationship clause, the ex-employee is prohibited from approaching or service certain clients and relations of the employer for a certain amount of time after the termination of employment. A relationship clause can be a good alternative for a non-competition clause. It offers the ex-employee the opportunity to take the next step in their professional career and simultaneously protects the reasonable interests of the (ex)employer to protect their (most important) suppliers and customers.
Maarten: “But even in this case it is necessary to provide a clear and precise indication of what you mean. What are business relations? Are the suppliers, customers or other stakeholders of the company? Are clients that you haven’t worked with for two years or a potential client who you send a proposal to over a year ago also included? It is also relatively easy nowadays for employers to monitor the activities of their ex-employees. Violations are easily made. For example, the judge (Court of Arnhem, March 8th, 2011) ruled that the accepting of connection requests on LinkedIn with clients of the ex-employee is in violation of the relationship clause. The employee had to pay a fine of € 20.000,00 to the employer.”
However, the inclusion of a relationship clause can also be seen as an unnecessarily heavy condition. Maarten: “For instance, when it involves an executive position or an administrative employee, then it is not objectionable at all for the ex-employee to be in contact with his former employers business relations when working for his new employer. In these cases, a confidentiality clause offers enough protection.”
Don't just quit
The advice for employees that consider switching over to the competitor and are bound by a non-competition clause? “Don’t just end the employment but start an open conversation with the employer. Everybody has the feeling that an employer tries to protect their commercial interests, but try to figure out what it is exactly that he is trying to protect. Most of the time, when that has become clear, it is possible to start making clear agreements.”
On request of the candidate employer, Maarten recently guided a commercial manager in the fresh produce industry who wanted to switch over to a similar job elsewhere. In his contract, he was bound to both a non-competition and a relationship clause. “In this case, the (future ex)employer was made aware of the plans in the early stages. We ended up making some good agreements: a longer notice period that allowed the ex-employer to find a suitable replacement. We also made a deal stating that the employee would not work with certain product groups for a set period of time. In doing so we avoided a conflict about what the relationship- and/or non-competition clause entails.
In our experience, it’s possible to come to an agreement both parties can agree with in most cases. Not letting someone leave by making them keep in line with the clause more often than none makes for bad future cooperation’s. Most of the time, this also marks the beginning of the end for a working relationship. Changing a non-competition clause into a relationship clause offers enough protection in most cases. The employee can move on and the interests of the employer are well protected. By doing this you can prevent employees having to remain at the company even though they want to leave and both parties end up feeling condemned to stay with each other. To summarize: make tailor-made agreements before entering into an employment contract. If the working relationship is clearly pasts its expiration date, then it is often still possible to find a solution that can work for the interests of both the employer and employee. Make sure to really think the interests that need protection through before entering into an employment contract. If the job changes within the company, then you need to readjust the relationship- or competition clause accordingly. And should the question of ‘what needs to be done’ with the clause to make my leave possible arise, really think about what can be done to make this possible, and be sure to properly document the new agreements that were made.”
This article previously appeared in the 4th edition, 33 volume of the AGF Primeur trade journal. See www.agfprimeur.nl.
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