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Applicability of ex-employer's duty to complain for breach of non-competition clause?

Blogs Employment Law Marc Janssen

Introduction

In this case involves the issue of whether former employees owe penalties to the former employer based on one or more violations of the non-competition clause. The court moderated the duration of an 18-month non-competition clause to the dates requested by the employee, found that the clause had been violated for a number of months during that period, and ordered employees to pay €20,000 and €30,000, respectively, in respect of forfeited fines. As far as relevant here, the ex-employees complained in cassation that the Court of Appeal wrongly ruled that the ex-employer was allowed to take time to investigate whether the non-competition clauses had been breached and did not violate its duty to complain (pursuant to Section 6:89 of the Civil Code).

The duty to complain

Checking whether a delivered performance corresponds to the agreed performance is the creditor's task. Should the creditor believe that the performance is defective, he is obliged to report this to the debtor within a reasonable time. This is also known as the duty to complain, as defined in Article 6:89 of the Civil Code (BW). This applies to all services rendered, such as the construction of an office building or the provision of maintenance or advice. It is up to the creditor to diligently investigate the delivered performance or purchase. Whether the duty to investigate has been fulfilled is determined by the nature and observability of the defect, and various other factors, such as the expertise of the parties. In addition, under the duty to disclose, the creditor must complain about the defect within a reasonable time. Thus, the duty to complain consists of a duty to investigate and a duty to disclose. The duty to complain only covers situations in which the debtor does not properly fulfill his obligation. This means that there must be a defect in the performance. An example is the delivery of eight instead of ten cubic meters of sand, or a machine that lacks a certain agreed upon feature. Although the creditor is free to complain however he wants, he must be able to prove that he complained in a timely manner. Therefore, it is better to file a complaint in writing. The complaint must clearly state the nature and extent of the defect. If the creditor does not complain or does not complain in a timely manner, all his rights based on the claim that the performance or purchase does not comply with the contract are forfeited. It is therefore crucial that when faced with a defective performance, the creditor complains in a timely manner and obtains counsel.

The Supreme Court

The Supreme Court has previously ruled that Art. 6:89 BW applies to all obligations. In addition, the Supreme Court has previously ruled that Art. 6:89 of the DCC applies only to cases of improper performance, and not (in part) to cases where no performance at all has been made. Opinions differ in the literature as to whether the duty to complain applies in employment law. In cassation, this case presented the question of whether the duty to complain of Section 6:89 of the Civil Code applies in the event of a breach of a non-competition clause. According to the Supreme Court, the obligation of a (former) employee under a non-competition clause is an obligation to refrain from actions described in the clause. Violation of such a clause is therefore not a case of defective performance, but of non-performance. Therefore, the obligation to complain contained in Section 6:89 of the Dutch Civil Code does not apply. The Supreme Court points out that the time that the (former) employer allowed to elapse between discovering the breach of the clause and calling the (former) employee to account for it, may under circumstances provide grounds for mitigation of penalties forfeited or - if the applicable requirements are met - for assuming that the right is forfeited.

Conclusion

Even though the duty to complain does not apply in the event of breach of a non-competition clause, the Supreme Court warns the employer to make this clear to the former employee in the event that it has been discovered that the non-competition clause has been breached, failing which, the ex-employer may in any case be faced with mitigation of the forfeited fines in connection with the breach of the non-competition clause or, even worse, estoppel so that, as in the case of breach of the duty to complain, the ex-employer cannot sue the ex-employee for breach of the non-competition clause. By the way, this ruling did - not - decide that in other labor law disputes (such as improper payment of irregularity allowance) the duty to complain does not apply. The Supreme Court has not ruled on that. If you have any questions as a result of this blog or have other questions, please feel free to contact us without obligation Marc Janssen or with any of the other members of the Section Employment Law.
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