In a recently-published judgment 1 the Mons Labour Court has shed new light on the validity of a so-called non-solicitation clause in an employment contract, i.e. a clause prohibiting an employee from soliciting or enticing away customers and/or personnel from the (former) employer.
Where certain case law had already pointed out in the past that, to be valid, a non-solicitation clause must be limited concerning its geographical area and application in time, the Mons Labour Court has now added a validity condition, namely the payment of a compensatory indemnity to the employee.
A non-solicitation clause is not a non-compete clause
Both non-compete and non-solicitation clauses are contractual restrictions on the freedom of labour and commerce.
A non-compete clause prohibits an employee from exercising the same or similar activities for a competing business after the termination of the employment contract.
A non-solicitation clause is a clause by which a former employee is merely prohibited from "soliciting" and/or "poaching" customers or personnel of his/her employer for a certain period after the employment contract termination.
Under a non-solicitation clause, the employee only undertakes to be "passive", in other words, not to take the active initiative in approaching the former employer's clients or employees. Such a clause does not prohibit the employee from entering into a contract with customers or employees if the latter have taken the initiative by contacting the employee.
Conditions for the validity of both clauses
Whilst a clear legal framework exists for non-compete clauses, this has not been the case for non-solicitation clauses.
Non-compete clauses are regulated by Article 65, § 1 of the Employment Contracts Act. For a non-compete clause to be valid, several conditions must be met, including, next to salary thresholds, a limitation of the geographic scope and a limited application in time. Moreover, a compensatory indemnity must be provided for, equal to at least half of the salary corresponding to the duration of the clause, to be paid by the employer to the employee.
As no legal framework exists for non-solicitation clauses, the conditions for such a clause's validity can only be derived from case law. Case law maintains two views in this respect.
According to certain case law, the non-solicitation of customers can only be part of a validly agreed non-compete clause, so that a non-solicitation clause prohibiting the poaching of any customers will not be valid if a non-compete clause's conditions are not met.
However, other case law holds the opinion that a non-solicitation clause can be validly entered into if it is not defined too broadly. This case law has pointed out that, to be valid, the non-solicitation clause must be restricted in its: material scope (it must define which customers come within the clause's scope); geographical scope; and must be limited in time.
The Mons Labour Court's ruling
The Labour Court of Mons recognised, as a principle, that a non-solicitation clause can be validly entered into if it is not formulated too broadly; yet decided here that the employment contract's non-solicitation clause was not valid, not only as it was not restricted in material scope, place and time, but also because it did not provide for a compensatory indemnity for the employee.
Therefore, the Court added a condition for a non-solicitation clause to be valid, namely the provision of an indemnity for the employee.
This is rather exceptional, and to our knowledge, (one of) the first published decisions adding such a condition.
However, the Court has been silent on the amount of such an indemnity. In any case, the Court did not say that this indemnity must be equal to the indemnity applicable for a non-compete clause, i.e. the salary for half of the non-compete period.
If no clause is valid
Finally, the Court stated that – due to lack of any valid contractual restriction – the poaching of the former employer's customers cannot be considered as wrongful, unless proved that fraudulent or unfair means were used to this end, such as with, for example, the use of confidential lists of customers or prospects, creating confusion, defamatory advertising in reference to the former employer, or systematic and persistent solicitation.
If so, then these actions are prohibited under Article 17,3° of the Employment Contracts Act, being considered as unfair competition and/or the divulging of company secrets.
Here, the Court held that the employee had indeed used confidential lists to solicit several clients and had invited them to transfer their business. The employee was ordered to stop the solicitation of customers and to pay compensation for the damages caused by his actions.
Conclusion
This judgment is remarkable and (one of) the first of its kind to be published. Without any legal basis, the Labour Court of Mons has added the condition of paying an indemnity to the employee as a condition for the validity of a non-solicitation clause.
It remains to be seen if future case law will confirm this point of view.
Footnotes
1. Labour Court of Mons, 8 January 2024, role number 2023/AM/28
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
