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What is a non-competition clause?

Verified 06 April 2020 - Directorate for Legal and Administrative Information (Prime Minister)

The non-competition clause is a clause inserted in the employment contract. It aims to limit the freedom of an employee to perform, after the breach of his contract, equivalent functions in a competitor or on his own account. To be valid, the clause must meet certain criteria.

The non-competition clause is not defined by law, but has been clarified by court decisions, i.e. by thejurisprudence..

In order to be applicable, the non-competition clause must meet certain defined cumulative criteria which condition its validity.

The clause must be written in the contract of employment (or provided for in the collective agreement).

The clause is applicable only if it protects the interests of the company (for example, when the employee is in direct contact with customers).

It must not prevent the employee from finding employment elsewhere.

The non-competition clause shall apply to:

  • In time (its duration should not be excessive)
  • In space (a geographical area must be provided)
  • To a specific activity (hairdresser for example)
  • If a financial contribution is foreseen

The financial contribution (or compensatory allowance) is paid by the employer to the employee who undertakes not to compete with his former employer at the end of his employment contract.

If the employee no longer complies with the clause, the employer may discontinue the payment of the consideration.

In the event of non-compliance with any of these criteria, the non-competition clause shall be invalid and shall be entitled to payment of damages for the benefit of the employee.

Implementation

The non-competition clause shall apply to:

  • on the effective date of termination of the contract (at the end of the period of notice)
  • or on departure of the employee (in case of exemption from notice)

The financial contribution shall be due where the non-competition clause is applicable (even if the employee is dismissed for serious misconduct or resigns).

This consideration may take the form of

  • a capital
  • an annuity (i.e. a bonus paid in a single installment or periodically)

It must be paid after the termination of the employment contract, not during its performance.

The consideration must be reasonable: a paltry consideration is an absence of financial consideration and is therefore not valid.

Waiver of employer

The employer may waive the application of the non-competition clause:

  • under any conditions laid down in the contract or in a collective agreement
  • or with the agreement of the employee if nothing is provided for in the employment contract or collective agreement

The waiver must be clear and not subject to interpretation by the employer or employee. In addition, it must be notified to the employee by registered letter with acknowledgement of receipt.

Warning  

the employer shall comply with the conditions of waiver laid down in the employment contract or treaty provisions if they exist.

Non-compliance with the employee's act

Failure by the employee to comply with a non-competition clause shall result in the cancelation of the compensation.

In addition, the judge may order the employee to pay damages..

Non-compliance with the employer's act

If the employer does not pay the compensatory allowance due to the employee, the latter is no longer bound to respect the non-competition clause.

The judge may order the employer to pay damages compensation for the damage suffered by the employee. The employer shall continue to pay the compensatory allowance for the period during which the employee has complied with the provisions of the non-competition clause.