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Stefan Sagel on non-competition clauses

An open disagreement about a non-competition clause in the employment contract of a top business manager is a rare occurrence. Both the company and the employee are wary of the possible damage to their reputation that such a conflict could cause.

What should have been a celebratory farewell, turned into more of an ugly divorce. Director of Dutch chain of chemists Etos, Saskia Egas Reparaz thought that after working there for more than 20 years, she would have a smooth transition to becoming new chief executive of Dutch retailer HEMA. But earlier this month it became clear that Ahold Delhaize, the parent company of Etos, is insisting that she respects the noncompetition clause in her contract. As a result, she now faces a period of obligatory leave lasting six months. However, she is refusing to accept this. The lawyers have come to the table and litigation is expected.

A top manager having to wait at home for six months before they can start working for a competitor is actually not unusual, according to labour law specialist Stefan Sagel of law firm De Brauw Blackstone Westbroek and Professor at Leiden University. Sagel is not involved in the case concerning Egas Reparaz. Sagel: ‘Members of the executive board or managers in the layer below have access to strategic plans and other competition-sensitive information. It is logical that they want to protect companies.’

An alternative that is less drastic – a nondisclosure agreement – will not suffice according to Sagel. ‘It’s not easy to prove that such an agreement has been breached. In fact, it’s almost impossible. And even if you disclose nothing that is confidential, you still possess that knowledge. And that’s not something you can just ignore when taking important decisions.’  The thinking behind such clauses is that after six months to a year, competition-sensitive information will be out-of-date. For this reason, says Sagel, this length of time is seen as the ‘gold standard’ for non-competition clauses.

Read the full article in Dutch newspaper NRC

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