Non-compete clauses are often automatically included in employment contracts, and most of the time their content does not comply with legal requirements, or the employer forgets to waive them if the employee resigns. These are mistakes that can cost companies dearly.
Conditions of enforceability, validity and effects of the non-compete clause
As a reminder, the non-compete clause is a clause which prohibits the employee, on leaving the company, from carrying out activities similar to those of his former employer, either by running his own business, or by joining a competing employer, using the knowledge specific to the company which he has acquired there, in industrial or commercial matters.
The non-compete clause is never valid for employment contracts where the gross annual remuneration is less than EUR 41,969 and is always permitted where this remuneration exceeds EUR 83,939 gross (amounts for 2024). Between these two amounts, the validity of the clause will depend on the collective labour agreements applicable to the company. In addition, the validity of the non-compete clause is subject to a condition of double similarity: the clause can only prohibit the exercise of activities which are both (i) similar to those exercised by the employee at the time of his departure, and (ii) exercised within a company with competing activities.
In addition, to be valid, the non-compete clause must be limited in time to a maximum of 12 months from the date of termination of the contract and it must be limited geographically, without being able to extend beyond Belgium. Last but not least, the law requires the clause to provide for the payment of a single lump-sum indemnity equivalent to at least half the gross remuneration during the period of validity of the clause.
A non-compete clause, even a valid one, will not be enforceable against an employee if the contract is terminated, either during the first six months from the start of the contract, or after this period by the employer without serious cause, or by the employee for serious cause. The clause therefore ceases to apply if the employee resigns or if the employment contract is terminated by the employer for cause. The law gives the company the option of waiving application of the non-competition clause within 15 days of termination. In the absence of such a waiver, the company will have to pay the lump-sum compensation applicable whether or not the employee goes to work for a competitor.
Some critical thoughts
- Does your company systematically check whether a non-compete clause applies to an employee who resigns? This check is an automatic reflex that we recommend you adopt so that you don't forget to waive the clause within 15 days of the termination, if it is deemed unnecessary. If you forget, you run the risk of having to pay substantial compensation, even though the employee leaving you poses no risk in terms of competition.
- Is the non-compete clause really effective, given the condition of double similarity? Remember that the clause can only prohibit the exercise of activities that are both similar to those exercised by the employee at the time of his or her departure, and exercised within a company with competing activities. This gives some latitude to an employee who, despite a valid non-compete clause, could work in a competing company, provided that he or she does not perform the same function as with the former employer. In our view, this makes the non-compete clause less effective.
- Does the geographical limitation (Belgium) still make sense today in the age of teleworking? Is an employee subject to a non-compete clause limited to Belgium and teleworking from abroad for a Belgian company subject to this clause? Case law has yet to rule on this. The clauses may need to be amended.
Partner NautaDutilh
Associate NautaDutilh
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