In a previous article, we wrote about the actions employees can take against a non-competition and/or non-solicitation clause. A non-competition clause can be challenged by employees if the clause unfairly disadvantages the employee. But how should an employer defend against this? In this article, on the basis of a concrete example, a judgment from the Amsterdam Court of Appeal, we examine in more detail the suspension (interlocutory proceedings) and nullification (proceedings on the merits) of a non-competition and non-solicitation clause and the balancing of interests that takes place.
Amsterdam Court of Appeal ruling: suspension of non-competition clause balancing interests
What was going on? The employee had been employed as a Trader Analyst for about 9 months when she terminated the employment contract. The employee then entered into a settlement agreement with the (former) employer in which they terminated the employment contract by mutual agreement and agreed that the non-competition clause would remain in effect. Just under a week later, the employee informs the employer that she will be working at another company as a Quantative Trader Associate. The employer responds, stating that the non-competition clause does not allow for this. The employee still joined the new employer.
The employee claimed before the subdistrict court, primarily, complete suspension of the non-competition clause and, in the alternative, that the clause be limited to such an extent that she could enter the service of the new employer. The subdistrict court granted the subsidiary claim. The former employer appealed.
Appraisal of suspension of non-compete clause on appeal
On appeal, the former employer put forward several arguments as to why the non-competition clause should be enforceable. The court of appeal thus began to assess whether the employer has an interest in enforcement. In particular, it was important whether the former employer could make it sufficiently plausible that the employee’s transfer would affect the former employer’s business. The court concluded that the employee did not have such knowledge of relevant commercial and technical information or unique work processes, or competitively sensitive information that the new employer could use. In doing so, the court considered it important that although the companies were both active in the field of cryptocurrency, at the ex-employer the employee was only active as a Trader Aanalyst in the Equity Options team and not in the Crypto Derivatives team. Thus, there was no evidence that the employee had gained knowledge and experience in cryptocurrency options trading and could disadvantage the ex-employer.
It follows from these considerations that the mere fact that employers are in the same industry does not prevent an employee from making the switch. The employee’s position and knowledge are of great importance in determining whether the non-competition clause can actually be enforced, even if the clause is validly agreed upon. The court then went on to weigh the parties’ interests. Among other things, the court found it significant that the employee had been employed for less than nine months and had only started working on equity options after four months. The court also considered that the employee had a clear interest in free choice of employment and that the employee’s financial position had improved significantly.
This balancing of interests led the court to conclude that the employee’s interest in being released from the non-competition clause outweighed the employer’s interest in maintaining it, and that the employee was unfairly disadvantaged by the clause. Indeed, the employer could not make the concrete disadvantage caused by the transfer plausible.
Defense of employer for enforcement of non-compete and non-solicitation clause
As an employer, do you want to enforce the competition and relationship clause? If so, first have the clause reviewed by a lawyer or employment law attorney to determine the validity of the clause. Next, see if the clause is applicable to the situation. Finally, you can see if the clause can be enforced. It is important that the departure of the employee to a competitor can cause actual damage to the organization in connection with the knowledge and skills acquired during the employment.
Information about competition and relationship clauses?
Want to know more about the legal validity, applicability or voidability of competition and relationship clauses? Contact Lisa Kloot, employment law attorney at LVH Advocaten in Rotterdam. She regularly advises and litigates on competition and relation clauses.
