A competing former employee? Take action!

Employers should take action if they find out that a (soon-to-be or) former employee is going to work for a competitor. If they do not do so or fail to do so on time they risk being left empty-handed, as is apparent from a decision by the Court of Appeal of ‘s-Hertogenbosch.

What was the case about?

After being employed for fifteen years, the employee, a trainee physiotherapist and sports instructor at a health and fitness centre, terminated his employment contract. He also said that he was going to take up employment with one of the employer’s direct competitors. The employer did not ask him any questions, nor did it refer to his non-competition clause.

After the employee had started his job with the competitor, he started posting various photos on, among other things, Facebook, showing him in one of his new employer’s branches posing with famous footballers who used to be the employer’s clients. Even after having seen these images, the employer did not take any action. In short, it sat back and did nothing.

The employer only confronted the employee three months later, claiming payment of a penalty of EUR 500 per day pursuant to his non-competition clause, now amounting to a total of EUR 55,000. The employee refused to pay the penalty, but did remove his communications from social media.

Sub-district court

The employer brought the case to court and claimed payment of the penalties. The employee responded by claiming the annulment of his non-competition clause. The judge dismissed both parties’ claims. What was important here was that the employer knew of the employee’s plans for the future and seemed to have agreed to them. The employer appealed the decision.

The appeal

The Court of Appeal found that, from the moment the employee had handed in his notice, the employer was aware of his plans to take up employment with a competitor and of his acquisition activities on social media. Nevertheless, the employer waited three months before taking action. Because of this inactive approach, the employee could reasonably expect that his non-competition clause did not prevent him from taking up employment with the competitor.  The employer should have objected or made a proviso against taking up employment with the competitor. It should also have informed the employee that his communications on social media were in breach of his non-competition clause. As the employer failed to do any of that, the Court of Appeal dismissed the claim for payment of the penalty.

Take action!

If you find out or suspect that an employee is going to take up competing activities, do not sit back; take action!

Tips:

  • ensure that there is a valid non-competition clause in place. Mistakes in the text are usually for the employer’s account, even if there is an obvious clerical error;
  • if a contract is renewed or there is a change of position, the employee should sign the non-competition clause again;
  • ask employees about their plans for the future when they resign. If the answers are unclear, persist!;
  • avoid making commitments or statements that could be interpreted as a commitment;
  • point out to employees that they have a non-competition clause, with a penalty clause if the contract has one, and confirm this in writing to avoid evidentiary issues;
  • send the new employer a demand letter referring to the non-competition clause. According to the Court of Appeal’s settled case law, a third party (the new employer) acts unlawfully if it knowingly benefits from someone else’s breach of contract, in this case the former employee’s breach of the non-competition clause;
  • start legal proceedings on time. According to case law, the chance of successfully enforcing the non-competition clause diminishes as soon as the employee starts to work for the new employer. Therefore, employers should claim an injunction in preliminary relief proceedings against the employee taking up employment with the new employer.

Eric van Dam (evd@clintlegal.com / +31 20 820 0330)