An employment agreement frequently includes a standard non-competition clause, even though its validity or relevance to the specific case has not been verified.
A non-competition clause is only valid if several conditions are satisfied. These conditions depend on the type of non-competition clause, i.e., a national non-competition clause, an international non-competition clause or a non-competition clause for sales representatives. They are laid down in the Law of 3 July 1978 regarding Employment Contracts (“LEC”). The following does not address the non-competition clause applying to sales representatives.
In order to be valid, the non-competition clause must be entered into in writing and the employee must have an annual gross remuneration of more than EUR 64,508 EUR (amount for 2013, indexed annually), except if a collective labour agreement excludes the possibility of providing for a non-competition clause for a specific function. If the employee earns between EUR 32,254 and EUR 64,508 (amounts for 2013, indexed annually), the non-competition clause is only valid for those functions that are laid down in a collective labour agreement.
National non-competition clause
The validity of a national non-competition clause is subject to the following conditions:
- It can only apply to similar activities for a competitor.
- It should be limited to places where the employee can actually compete with the employer and should only apply to the Belgian territory.
- Its duration should not exceed 12 months following the termination of the employment agreement.
- It must provide for the payment of a non-competition indemnity that must amount to at least 50% of the gross remuneration for the term of the non-competition clause.
The non-competition clause is not enforceable in case of termination during the trial period, termination by the employer without serious cause (after the trial period) or termination by the employee for serious cause (after the trial period).
The employer can waive the application of the clause within 15 days after the end of the employment. Failure to do so results in the non-competition indemnity becoming due.
International non-competition clause
The international non-competition clause can only be used if the employer is active on or has important economic, technical or financial interests in international markets or has its own R&D department.
The validity of the international non-competition clause is subject to the following conditions:
- It can only apply to similar activities for a competitor.
- It must define clearly its geographical scope but should not be limited to the Belgian territory.
- Its duration may exceed 12 months following the termination of the employment agreement.
- It must provide for the payment of a non-competition indemnity that must amount to at least 50% of the gross remuneration for the term of the non-competition clause.
This non-competition clause is not enforceable in case of termination during the trial period, termination by the employer without serious cause (after the trial period) or termination by the employee for serious cause (after the trial period). However, it is possible to provide that it will also be enforceable in case of termination during the trial period or in case of termination by the employer without serious cause (after the trial period).
The employer can waive the application of the clause within 15 days after the end of the employment. Failure to do so results in the non-competition indemnity becoming due.
Consequences if validity conditions are not satisfied
If one or more of the above conditions are not satisfied, the entire non-competition clause will be considered to be null and void for the benefit of the employee. This means that only the employee can invoke the nullity of the clause.
As only the employee is entitled to decide whether or to invoke the nullity of the non-competition clause, the employee has the choice between (i) invoking the nullity of the clause, in which case the employee is not entitled to a non-competition indemnity and does not need to comply with the non-competition clause; or (ii) not claiming the nullity of the clause, in which case the employee will receive the compensation payment (even if the clause is not valid), but has to respect the non-competition clause (except in case of a timely waiver of the non-competition clause by the employer).
First, this means that an employee who will perform competing activities after his or her departure, is not bound by the null and void non-competition clause and that the employer will not have any protection against competition by the former employee.
Second, this also implies that an employee who will not perform competing activities after his departure can nonetheless claim a non-competition indemnity on the basis of a null and void non-competition clause (except, as noted, in case of a timely waiver of the non-competition clause by the employer).
Therefore, it is advisable, in all circumstances, to analyse the validity of the clause and waive its application within 15 days after the end of the employment contract even if the clause turns out to be null and void (unless the employer wants the employee to refrain from competing and thus hopes that the employee will not claim the nullity of the non-competition clause).
Some employers include a standard waiver in their termination letter templates as a reminder to themselves that they have to analyse the validity of the non-competition clause and, if necessary, waive its application. In that case special attention should be paid to the situation in which the employee terminates the employment contract. In that case the non-competition clause is enforceable, but the standard waiver in the employer’s termination letter templates will not be noticed as the termination was given by the employee. The failure by the employer to waive the application of the clause in a timely fashion will result in the payment of a compensation payment.
The waiver of a null and void non-competition clause does not preclude the parties from entering into a valid non-competition agreement after the termination of the employment contract. If such a non-competition agreement is entered into, it will not fall within the scope of the LEC and is not subject to its validity conditions.
