On special experience and limitation of occupation

On special experience and limitation of occupation

Doron Afik, Esq.
April 4, 2023

Not infrequently, an employer invests considerable effort in training an employee for the needs of the job, and sometimes where an employee arrives without any experience or knowledge of the field, and gains all of the training and experience with the employer, but does this fact entitle the employer to prevent the employee from competing with it after the employment ends?

Freedom of occupation has been recognized in Israel as a constitutional right, but in contrast to the employee's right to freedom of occupation, there is the right of the employer to prevent the employee from competing with it by using the unique knowledge and experience gained from the employer and the right of the parties to freedom of contract and their right to set commercial terms for the employment agreement, therefore in some cases the Courts recognize restrictions on occupation.

The classic holding regarding restrictions on freedom of occupation is the ruling in the case of Checkpoint v. Redguard, in which the National Labor Court clarified that restrictions on an employee's freedom of occupation must be strictly examined due to the inequality between the employer and the employee - who is the weak side - and the restriction on his right to move from one place to another may harm the right to self-fulfillment. Similarly, in a case discussed in March, 2023, at the Regional Labor Court in Tel Aviv, the Court clarified that when the employer provided special training to the employee or gave the employee explicit financial consideration against the commitment to non-compete, when the duty of good faith and the duty of trust required by virtue of the employee's individual position require this, or when there is an apprehension of disclosure of a commercial secret - the Court will tend to recognize the restriction of occupation. That case discussed an employee who worked at a high-tech company as a software engineer and covenanted not to work at any competing business during the period of his employment and 22 months thereafter and the Court held that that the restriction will apply only when it protects both parties and is reasonable. In that case, the non-competition clause was not applied because the employee's new employment was found to not be competing and the employee did not breach the duty of confidentiality.

Note, that not any special training of an employee will justify a restriction on the freedom of occupation. For example, in a case discussing pilots who were sent for expensive and special professional training on behalf of the employer, some of which outside of the country, the National Labor Court struck a balance between the interest of the pilots to find options to supplement income due to a limited scope of work, of which the company was aware, and the company's interest in reimbursement of expenses spent on the training of its employees, which training may be used for the benefit of a third party. Because it was training on a unique aircraft that does not exist in other companies in Israel and there was no relationship between the amount of the training and the pilots' earnings, it was finally determined that the pilots' earning potential trumps and therefore it was not possible under the same circumstances to limit their freedom of occupation.

In light of the above, it is important for employers to be regularly accompanied by a lawyer with experience in the field of labor law and the commercial field. Sometimes the employment agreement can be designed in such a manner that the special training the employee undergoes will allow a certain limitation on the freedom of occupation and sometimes it is sufficient for the employer (and the employee) to know the limitations and understand their rights so that they act accordingly.