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08. Restrictive Covenants

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08. Restrictive Covenants

Definition and Types of Restrictive Covenants

As a general rule, article 6 of the Employment Contracts Act stipulates that all clauses which are not compatible with the content of the said act, are null and void, insofar as such clauses limit the rights or aggravate the duties of the employee. For some types of clauses, a legal framework is foreseen in the Employment Contracts Act. One example is Article 17 of the Employment Contracts Act, which provides that during the contract and after its termination, the employee must abstain from i) divulging manufacturing secrets, trade secrets and secrets pertaining to any matter of a personal or confidential nature, the knowledge of which the employee may have acquired in the exercise of his/her professional activity, and ii) performing or cooperating with any act of unfair competition. These two obligations result from the duty of good faith, which governs any contract under the rules of Belgian civil law. Other types of clauses (e.g., place of residence clause for fire fighters) are not legally defined but are nevertheless legal under certain conditions.

Types of Restrictive Covenants

Non-compete clauses

As a consequence of the principle of good faith, the employee is prohibited from competing with his/her employer during the execution of the employment contract. A non-compete clause, which recalls this prohibition, may validly be inserted into the employment contract without any specific formality or condition. For a non-compete clause to apply after termination of the employment contract, strict conditions have to be complied with. The clause must be in writing and is valid if the employee’s annual gross remuneration exceeds 78.706 EUR. There are further restrictions on its applicability if the annual gross remuneration does not exceed 78.706 EUR, as a CBA authorising it must be entered into at an industry or company level and the annual gross remuneration must in any case exceed 39.353 EUR (these amounts, applicable for 2023, are updated annually).

In general, a non-compete clause is valid if it is limited to activities similar to those presently performed by the employee and to a well-defined geographical area limited to the national territory, if the new employer is a competitor, and provided that the clause does not exceed 12 months.  Except for sales representatives, the clause must provide for the payment of an indemnity to the employee equal to at least 50 % of the salary corresponding to the duration of the non-compete provision. The clause is not applicable if (i) the employer terminates the contract during the first six months of employment, (ii) if after the first six months of employment, the employer terminates the employment contract with a notice period or an indemnity in lieu of notice, or (iii) the employee puts an end to the agreement on the basis of a serious breach committed by the employer. Provided that some specific requirements are met, various deviations from the conditions of the general non-compete clause can be carried through (i.e., the ‘special non-compete clause’). This clause may only be used for certain categories of enterprises and for white-collar employees (except sales representatives) with specific functions.

The enterprises concerned have to comply with one of the following conditions:

  • they must have an international activity or considerable economic, technical or financial interests in the international markets; or
  • they must have their own research department.

In such enterprises, the special non-compete clause may only be applied to those employees whose work allows them to directly or indirectly acquire a practice or knowledge peculiar to the enterprise, which, if used by another entity, could be detrimental. If these conditions are met, it is possible to deviate from the general non-competition clause insofar as it restricts the geographical application of the non-compete to the national territory and is limited to a maximum period of 12 months. The special non-compete clause may also be applicable when the employment contract is terminated by the employer with a notice period or an indemnity in lieu of notice after the first six months of employment have elapsed, or if the contract is terminated during the first six-months of employment, whatever the cause of the termination may be.

Non-solicitation of employees

It is not uncommon to foresee a ‘non-solicitation of employees clause’ in employment contracts or separation agreements that entails a restriction not to approach employees of the (former) employer. In principle however, former employees are allowed to approach employees of the former employer, as long as such actions cannot be qualified as unfair competition (i.e., with the sole intent to harm the former employer).

Non-solicitation of customers

The usage and form of non-solicitation clauses is not specifically legally regulated. Nevertheless, they are subject to common contract law. The principle of freedom of contract permits parties to stipulate clauses as they wish, but the concerned parties should take into account that labour courts have the competence to mitigate or declare void clauses constituting an abuse of rights.

Enforcement of Restrictive Covenants – Process and Remedies

It is customary to foresee the possibility of damage claims in case the employee would violate certain restrictive covenants. The enforcement possibilities for certain restrictive covenants are however defined by law. In case an employee violates the non-compete clause for example, the damage claim cannot be higher than the repayment of the indemnity awarded to the employee (see supra IX. 2. (i)) on top of indemnity equal to the same amount.

Use and Limitations of Garden Leave

Garden leave is not allowed under Belgian employment law, because it entails that the employee would not be allowed to perform his/her job, as this condition is deemed an essential element of every Belgian employment contract. A garden leave where the employee is exempt from performing his/her duties during the notice period, is only possible with the employee’s explicit consent. The unilateral decision of an employer to send an employee on garden leave, would grant the employee the right to claim damages, or the contract could even be regarded as being terminated by the employer (constructive dismissal).

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