How to read a non-compete clause

It is important when interpreting a non-compete clause in addition to examining the actual phrasing also to consider the significance of the clause in the perception of the parties involved and their warranted expectation of one another in this respect. As non-compete clauses rein in the constitutional right to free choice of labour, it is essential that they should not be given an overly liberal interpretation. In the inadvertent event of a non-compete clause containing unclarities, these may not be interpreted to the detriment of the employee but rather, are the employer’s risk.

The Sub District Court in interlocutory proceedings was presented with the question as to whether an employee’s non-compete clause with his former employer stopped him joining his new employer. The non-compete clause forming part of the employment contract had not come up as a point for discussion when the employee first joined his now former employer, and so the Court confined itself to an analysis of the actual text of the non-compete clause, from the phrasing of which it followed that the employee had been banned from entering into the employ of, or associating himself with, any business whose operations were identical or similar to his former employer’s. The business operations of the old and the new employer as per the respective Commercial Register entries were different, with the former employer’s business being described as the manufacture – inclusive of maintenance and repair work – of equipment for use in the cocoa industry and the new employer’s, as the processing of cocoa. The only “common denominator” happened to be that both businesses were involved in the cocoa industry, which according to the Court did not make them identical or similar. This left the employee free to join his new employer.

Dutch version: Uitleg van concurrentiebeding