The Court of Appeal of ‘s-Hertogenbosch recently rendered a decision on the validity of a competition and relations clause following a major change to an employee’s position.
The employee had, since 2008, been employed with the same company as a service technician. His employment agreement included a competition and relations clause. In 2013, he was promoted to the position of senior service technician, and given a substantial pay rise as well as a fixed commission. At the time, the parties did not agree a new competition and/or relations clause.
Following a cooling-off in relations, and after mediation had failed to bring the parties closer together, the subdistrict court, at the request of the employer, terminated the employment agreement as at 1 February 2017. The employee then appealed, requesting, amongst other things, for his competition and relations clause to be declared void.
Not a conventional career move or natural course of events
According to the court of appeal, a major change in the employment relationship was involved. At the time when the competition and relations clause had been agreed, the employee was one of thirty service technicians, and it was certainly not for granted that he would one day become one of three senior service technicians. The change to senior service technician was neither a conventional career move, nor part of the natural course of events. For this reason, this change in the employment relationship had not been foreseen when the employee, when still just a service technician, approved the competition and relations clause.
In addition, in the view of the court of appeal, both the competition and relations clause had, through the promotion, become a substantially greater burden for the employee. Whilst, as a service technician, he had been assigned to a limited territory, as a senior service technician, his territory now extended over all of the Netherlands. As a result, he also came into contact with the customers of service technicians in other parts of the country and, consequently, his relations clause took on a more far-reaching scope than at the time when he entered into that clause in his old position.
As a senior service technician, he also started taking part in confidential meetings, as a result of which he increased his specialised knowledge of the products and conditions of customers and of key accounts. He also took training courses in Germany, for example, in connection with the launch of new products, such that he now possessed knowledge of inestimable value to competitors of his employer. As a senior service technician he himself also gave training courses, through which he gained in-depth product knowledge and became aware of specific technical problems. Through these changes, the competition clause had now taken on a wider range.
Through the change of his position from service technician to senior service technician, whilst the competition and relations clause remained in effect, the employee became substantially more encumbered with regard to finding new, equivalent employment. The competition and relations clauses had thus lost their validity: so decided the court of appeal.
Employers: keep your clauses up-to-date!
Where a major change of position is involved and, as a result, the relevant competition and/or relations clause becomes a substantially greater burden, renegotiation of the clause(s) is imperative. Should you, as an employer, neglect this, there is a high probability that you will be left ‘empty-handed’ in the event that the employee in question leaves the company. Certainly now that the economy and jobs market are improving, companies will have to bear in mind that they are not the only party interested in their employees. Postcontractual clauses, such as competition and relations clauses, are highly useful instruments for protecting one’s market position.
If a change of position is not major in nature or if the competition and/or relations clause does not start becoming a greater burden, it/they will remain valid. Where a ‘normal’ career process is involved, renegotiation is, in principle, not needed. We nevertheless would advise employers to look carefully at the competition and/or relations clause of an employee who is changing positions and, if necessary, to renegotiate. Experience has shown that, where there is the prospect of a promotion and matching pay rise, employees are usually not disinclined to agree a (new) competition and relations clause.
You can find the full ruling (in Dutch) here.