Common use of Competition provision Clause in Contracts

Competition provision. Provisions in employment contracts that forbid employees to enter into an employment contract with competitors of the employer are non-binding if such an engagement is wider in scope than would be necessary in order to prevent competition or unfairly limit the employees freedom to employment. To determine whether this is the case, each case must be evaluated on a case-by-case basis, taking into consideration all circumstances. Competition provisions, therefore may not be worded too generally. When assessing the permissible scope of a non-competition clause in a contract of employment particularly as regards scope end time limits, the following factors must be considered: a. The type of work performed by the employee involved, e.g. is the employee a key employee, in direct contact with the customers or has high level of confidentiality. In addition, what knowledge or information the employee might possess with regard to the activities of the company or its customers. b. How quickly the employees knowledge becomes outdated and whether a normal balance is kept among the employees. c. The type of operations involved and the identity of the competitors in the market where the company operates and which the employees know-how covers. d. That an employees freedom of employment is not restricted in an unfair manner. e. The non-competition clause must be defined and concise with regard to the purpose of protecting certain competition interests. f. The remuneration of the employee will also have an effect, i.e. for instance, what his wages are. The competition provisions of employment contracts do not apply if the employee is dismissed from his job without sufficient cause.