Does the non-competition clause in the employment contract remain in full force?
This week we will discuss a judgment in summary proceedings concerning an employee with a non-competition clause in his employment contract. He is keen to accept a new job and asks the subdistrict court to suspend his non-competition clause because there has been successive employment with his former employer. Does he succeed?
Employee has been working for company X as a junior work planner/draughtsman since 1 September 2014. The employment contract contains a non-competition clause. With effect from 1 July 2020, the employee joined Van Elteren. Prior to this, the employee signed the letter from Van Elteren and company X dated 29 June 2020. The letter stated that the employment contract would be continued at Van Elteren and that there was a question of successive employership. Since joining Van Elteren, the employee has worked as a junior project manager. Hence, this is a different position.
Another company, Y, offered the employee a job as a project manager. Employee is keen to accept this job and on 30 December 2021, he gave conditional notice of termination of his employment contract with Van Elteren, effective 1 February 2022. In other words, under the condition that Van Elteren would not hold him to the non-competition clause.
However, Van Elteren did not agree and informed the employee that it was not prepared to release him from the non-competition clause. On 31 January 2021, the employee again gave conditional notice of termination of his employment contract as from 1 March 2022. The employee sought a court order in summary proceedings to suspend the non-competition clause in its entirety or at least in part, in the sense that the employee would be permitted to start work for company Y.
Judgment of the Subdistrict Court in summary proceedings
A non-competition clause must be re-negotiated in writing if a change in the employment relationship is of such a far-reaching nature that it will impose an appreciable burden on the clause. The non-competition clause does not lose its validity completely under all circumstances, but only insofar as the combined circumstances referred to in the criterion make this necessary in view of, on the one hand, the protection that (the requirement of writing) article 7:653 (1) of the Civil Code offers the employee against the unthinking conclusion of the aforesaid clause and, on the other hand, the employer's interest in protecting the clause. To this end, the court must examine not only whether there has been a fundamental change in the employment relationship, but also whether, and if so on what basis, that change has the effect of substantially increasing the burden of the non-competition clause.
In view of this framework for assessment, it will first be assessed whether there has been a change in the employment relationship of a significant nature. In this case, the employee's duties have changed and he has more responsibilities. In view of this and the parties' explanations, the Subdistrict Court is of the opinion that it is sufficiently plausible that there has been a change in the employment relationship of a substantial nature.
Next, it must be assessed whether the non-competition clause has become considerably more onerous. The Subdistrict Court finds that it has. If the non-competition clause is upheld, the employee will not be able to work as a planner or project manager for a company that provides similar or related services to those provided by Van Elteren. This would mean that the employee would no longer be able to perform both his new role as project leader and his old role as planning engineer for a competitor of Van Elteren. This meant that the employee was prevented from finding a new, similar job, to such an extent that the Subdistrict Court considered that the non-competition clause had become considerably more onerous.
In view of the above, it has become sufficiently plausible that in proceedings on the merits, it will be ruled that the non-competition clause has lost its validity because there has been a change in the employment relationship of such a drastic nature that the non-competition clause will weigh considerably heavier.
So what should the employer have done? Van Elteren should have agreed a new non-competition clause in writing with the employee, tailored to the interests of the E&I branch which, in its view, should be protected, when it appointed the employee as junior project manager. However, it failed to do so and the consequences are therefore at its expense and risk. The subdistrict court therefore suspended the non-competition clause.
You can read the original judgment here.
Caution is advised in the case of successive employership and/or a change of position. Employers should not assume that old non-competition clauses will continue to apply unchanged for ever. After all, circumstances may change. Do you have any questions about this? Or about other employment law topics? SPEE advocaten & mediation can help you.