The problem
The employee in question works as a director on the basis of an employment agreement. At a certain point in time, the parties conclude a termination agreement on whose basis the employment agreement is to be ended by mutual consent. The employee’s activities however continue, and the parties in turn negotiate a new agreement. Shortly thereafter, the parties conclude a new agreement, this time: a management agreement, not an employment agreement.
The company subsequently terminates the management agreement. The director however adopts the standpoint that no management agreement is involved, but rather, an employment agreement. He requests the subdistrict court to quash the termination, or to order his client (or, respectively, his employer) to pay him reasonable compensation. He also requests exemption from the competition clause or the award of compensation for the duration of the restrictions under that clause, invoking in this connection the protective provisions provided to employees under employment law.
Qualification of the agreement
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Reasonable compensation
As no termination of employment agreement is involved, there is, in the judgement of the subdistrict court, no reason for awarding reasonable compensation, not to mention the fact that no circumstances are present that could justify such compensation.
Exemption from competition clause
As no employment agreement was involved, the director’s invoking of the protective provisions provided under employment law in respect of the competition clause were also in vain, as such protection applies only where an employment agreement is involved. It was also relevant in this connection that this clause had been agreed between the parties following extensive negotiations, during which it never became plausible that the clause could put the director at an unreasonable disadvantage, meaning that there are no grounds for either termination, limitation or compensation.
In short, the director comes away empty-handed. Nevertheless, the decision confirms that the circumstances in the case – i.e., the intentions of parties at the time of entering into an agreement, but also the way they then implement it in practice – are crucial to the legal qualification of their relationship. In view of this, first entering into an employment agreement and then subsequently entering into a management agreement, does not appear to be the most sensible course of action.
