BACKGROUND
Post-termination non-compete clauses[1] restricting employees from engaging in competing activities once they have left their employer are a frequently used type of restrictive covenant in Belgium.
Under Belgian law, such post-terWXC mination non-compete clauses can only be validly entered into if the employee’s total annual gross remuneration is equal to at least EUR 72,402[2] (or EUR 36,201[3] if a sector-level collective bargaining agreement applies[4] or for sales representatives). Their validity and enforceability are furthermore subject to strict requirements, non-compliance with which results in the clauses being null and void and hence unenforceable:
- they can only apply to activities that are both (i) similar to the ones the employee carried out for the employer and (ii) competing with the employer’s activities;
- their duration cannot exceed 12 months (or 24 months in case of so-called “international” non-compete clauses);
- they must be geographically limited to the places where the employee can actually compete with the (former) employer, without exceeding the Belgian territory (other jurisdictions may be added in case of an “international” non-compete clause); and
- (except for sales representatives) they must provide for the payment of a non-compete indemnity equal to at least 50% of the remuneration corresponding to the duration of the non-compete clause.
Employers may waive the application of post-termination non-compete clauses of their employees (other than sales representatives), provided that they do so within 15 days following effective termination of employment. In such case, no non-compete indemnity will be due by the employer, but the employees will be free to (fairly) compete with their former employer once their employment comes to an end.
In practice, employers however often forget to waive the application of post-termination non-compete clauses that they did not intend to enforce, resulting in the non-compete indemnity becoming indisputably due.
INTERESTING DEVELOPMENT
The Dutch-speaking Brussels Labour Tribunal has recently adopted a slightly less stringent approach when it comes to waiving the application of post-termination non-compete clauses.[5]
In the case at hand, the post-termination non-compete clause provided that the employer would confirm its intention to enforce (as opposed to expressly waive) the application of the clause within a 15 days’ period following the effective termination of employment (or in case of termination with notice, upon notification of the termination decision) and that in such case, the employer would pay a non-compete indemnity equal to 50% of the employee’s remuneration corresponding to the duration of the non-compete clause.
After having resigned with a notice period, the employee was however not informed by the employer about the latter’s intentions with respect to the post-termination non-compete clause. The employee therefore argued that the employer failed to waive the application of the clause and claimed payment of the non-compete indemnity.
Interestingly, the Dutch-speaking Brussels Labour Tribunal decided that even absent explicit waiver by the employer of the application of the post-termination non-compete clause no non-compete indemnity was due.
The Labour Tribunal argued that, considering that it is as such not subject to any formal requirements, the waiver implicitly took place taking into account the wording of the post-termination non-compete clause.
The Labour Tribunal hence considered the application of the clause to be validly waived by the employer and hence rejected the employee’s claim.
WHAT CAN WE DO FOR YOU?
Notwithstanding the decision by the Dutch-speaking Brussels Labour Tribunal, it remains strongly recommended that you explicitly waive (preferably in writing) the application of your post-termination non-compete clauses in due time if you do not wish to enforce these.
That said, this decision may be an opportunity to revise the wording of your standard post-termination non-compete clauses.
To anticipate the possibility of overlooking to duly and timely waive the application of a post-termination non-compete clause that you did not want to enforce, we can assist you in reviewing the wording of your standard post-termination non-compete clauses in light of the abovementioned case law of the Dutch-speaking Brussels Labour Tribunal.
Proper wording of your standard post-termination non-compete clauses may give you a fall-back position mitigating the risks triggered should you overlook to waive the application of these clauses.
[1] This contribution does not cover non-compete clauses entered into after termination of employment.
[2] Amount for 2021, subject to annual indexation.
[3] Amount for 2021, subject to annual indexation.
[4] To date, such sector-level collective bargaining agreement was only adopted in the horeca industry.
[5] Decision by the Dutch-speaking Brussels Labour Tribunal of 5 October 2020.
