Using a Non-Poaching Clause Can Protect Your Business

Written on 17 Nov 2016

Recruiting talented staff is challenging and once you have found the right person for your business, retaining that talent is key.  Many employers have faced the frustrating situation of an employee working at a client site leaving their employment to work for the client company directly.  In this situation, you not only lose your employee, but also risk losing your commercial relationship with that client.

What can you do to prevent this from happening?

Unfortunately, a non-competition clause does not provide a simple solution. In fact, such a clause only prevents the employee from carrying out, after the termination of the employment contract, the same duties as he performed while employed by your company, for direct competitors.  A non-competition clause does not prevent the employee from working for a client, who carries out a different activity from your company. Furthermore, whenever the non-competition clause is enforced, you must pay a non-competition indemnity to your former employee. The amount payable under this indemnity is equal to half of the remuneration costs over the duration of the non-competition clause.

A non-poaching clause is an alternative to the non-competition clause. Non-poaching clauses are not regulated by legislation applicable to employment contracts or by any other specific legislation. A non-poaching clause is a contractual clause, which is inserted into the employment contract and prevents the employee from working for clients with whom they were in contact before the termination of their employment, for a specified period of time post termination.

If the employee breaches the non-poaching restriction (e.g. if they start working for a client), the employee may have to pay his employer a specific amount. Caution must be exercised where non-poaching clauses are concerned. If worded too loosely, a non-poaching clause can be found invalid. Consequently, when drawing up non-poaching clauses, we advise you to specify or limit which clients the worker is prohibited from working for, and to set a limited time frame for this prohibition to be in force.

As the conditions regarding the validity and application of non-poaching clauses are not regulated by law, this can create uncertainty, and it is therefore important that the provision is carefully worded.  We do advise you to include a non-poaching provision in your employment contracts.  Ideally, the provision will protect your company for the specified period and, at the very least, the clause will have persuasive, moral value, making the employee think twice before leaving to work for a client.