The (in)validity of a post-contractual non-competition clause in a franchise agreement: analogy with employment law?

On 5 September 2017, the District Court of Gelderland, ECLI:NL:RBGEL:2017:4565, rendered a judgment on, among other things, whether Bruna, as a franchisor, could invoke the ban on a franchisee from performing competitive acts after the expiry of a franchise agreement . The franchisee had argued that the franchisor had structurally and very seriously failed in its obligations as a franchisor, as a result of which the franchisee was forced to terminate the franchise agreement. Therefore, according to the franchisee, the prohibition no longer applies. 

What does not follow from the judgment is whether an analogy of this situation between an employer and an employee has been invoked. Labor law stipulates that an employer cannot derive any rights from an agreed non-competition clause if the termination or non-renewal of the employment contract is the result of seriously culpable acts or omissions on the part of the employer (see Section 7:653(4) of the Dutch Civil Code). . 

In the present case, the franchisee was not followed by the court, because it has not become apparent that the franchisee had also informed the franchisor before the termination of the franchise agreement that the franchisor was failing in its obligations as a franchisor. Because the franchisee had only made this point of view known after the termination of the franchise agreement, it cannot be established, according to the court, that the termination of the franchise agreement is largely attributable to the franchisor. The non-competition clause therefore remains valid on that basis. Because, incidentally, in the opinion of the court it has been sufficiently established that the franchisee was not involved in the notified competitive actions, the appeal to the non-competition clause was still rejected. 

It can be deduced from this ruling that the power relationship between a franchisor and franchisee may in certain situations show a parallel with the power relationship between an employer and an employee. Does a small dependent franchisee deserve the same protection against a large powerful franchisor that an employee has against an employer? The court’s considerations do not seem to rule out this possibility. 

mr. AW Dolphijn – franchise lawyer 

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .