What is a non-compete clause?
Verified 27 October 2023 - Legal and Administrative Information Directorate (Prime Minister)
Can your employer include a non-compete clause in your employment contract? What are the permitted terms that may be included in this clause? We explain what you need to know about the non-compete clause.
The non-compete clause is a clause inserted by your employer into your employment contract.
It is intended to limit your freedom to exercise, after the termination of your contract, equivalent functions in a competitor of your employer or on your own account.
The non-compete clause is not defined by lawbut it has been regulated by court decisions, that is to say by the case law.
The clause must be written in the contract of employment (or provided for in collective agreement on the date of signature of the contract).
The clause shall apply only if it ensures that to safeguard the legitimate interests of the company your employer (for example, if you are in direct contact with your company's customers).
The clause must not have the effect of preventing you from find a job in another company.
For it to be applicable, the non-competition clause must satisfy certain cumulative criteria definitions that condition its validity:
- It must be limited in time (it must not be of excessive duration)
- It must be limited in space (a geographical area must be provided)
- It must be linked to a specifically targeted activity (e.g. hairdresser)
- It must include a financial contribution for the employee
In the event of non-compliance with any of these criteria, the non-compete clause shall not be valid.
The non-compete clause shall apply to:
- Either on the effective date of the end of your employment contract (at the end of the notice)
- Either when you leave the company (in case of waiver of notice)
Financial consideration (or compensation)
Yes, a financial consideration (or compensation) is paid to you, after the termination of your employment contract, by your employer where a non-compete clause is applied.
In return for this compensation, you agree to not to compete to your former employer at the end of your employment contract.
If you do not comply with the conditions of application of the non-competition clause, your employer may interrupt the payment of the financial consideration. Your employer must prove that you are not complying with the non-compete clause.
Please note
In the event of retirement at the end of your employment contract, your employer must waive the non-competition clause within the time limit set out in your employment contract or in the collective agreement. If you do not withdraw the clause before you leave the company, you are due the financial consideration.
Amount of the financial contribution (or compensatory allowance)
The financial consideration is due to you as long as the non-competition clause is applicable (even if you are dismissed for gross negligence or if you resign).
Its amount is defined by the employer and the employee in the employment contract.
This consideration may take the form of:
- Or capital (in the form of a single payment)
- Or an annuity (i.e. a premium paid in one installment or periodically)
Please note
The financial consideration is subject to income tax and is graspable as part of the salary.
It must be paid to you after the termination of your employment contract and not during its execution.
The consideration must be reasonable : a negligible consideration is equivalent to a lack of financial consideration and is therefore not valid, according to the case-law.
Reminder
The non-compete clause and the accompanying financial contribution are not defined in the law. They are freely agreed between the employee and the employer. Only case law has provided a framework for their application.
Yes, your employer may waive the non-compete clause:
- Either under the conditions which may be laid down in your contract of employment or by collective agreement or by a company agreement
- Either with your agreement if nothing is provided for in your contract of employment or the collective agreement or the company agreement
The waiver must be clear and not subject to interpretation by the employer or employee.
In addition, it must be notified to you by letter RAR: titleContent.
Warning
your employer is required to comply with the conditions of waiver set out in your contract of employment or treaty provisions if they exist.
If you do not comply with the conditions of application of the non-competition clause at the end of your employment contract with your former employer, the payment of the financial consideration may be canceled.
It is up to your former employer to provide proof to the judge that you do not comply with the non-compete clause.
In addition, the judge may order you to pay damages to your employer and to reimburse him all or part of the financial consideration because of the harm done.
If your employer does not comply with the clause or does not pay you the financial consideration at the end of your employment contract, you are no longer obliged to comply with the non-competition clause.
Please note
The employer cannot to withdraw from its financial obligation by deciding to waive the clause unilaterally except if provided for by treaty provisions or the contract of employment.
It is up to you to provide the evidence to the labor council (CPH) that your former employer does not comply with the non-compete clause.
You may use a lawyer to appear at the CPH hearing, but this is not mandatory. You can introduce yourself alone or have a trade union advocate.
In addition, the CPH may order your employer to pay you damages to compensate for the damage suffered.
Please note
The employer is still required to pay the financial consideration during the whole period provided for in the non-competition clause.