Non-Competition Undertaking: "... I agree and undertake that for a period of 12 months from the date of termination of my employment with the Company, I will not work, directly or indirectly, for the Company's customers with whom I was in business relations during the period of my employment with the Company, and/or for the Company's competitors and/or compete with the Company in any way."
"Non-solicitation: During the period of my employment with the Company and one (1) year after its termination, I will not solicitate, directly or indirectly, and I will not employ any employee or consultant of the Company to work for my benefit or for the benefit of any other party. I also undertake that during the period of my employment or during a period of 12 (twelve) months after the termination of my employment with the Company, I will not cause, whether directly or indirectly, that the Company's customers and/or its suppliers and/or service providers terminate their relations with the Company or reduce their activity with the Company.
Valid: "My obligations under this agreement will remain in effect even after the termination of my employment, whatever the reason for termination of my employment."
- In summary, the employees undertook to keep confidential any information belonging to the company as detailed above, and undertook not to compete with it and to refrain from soliciting the company's employees for a period of 12 months from the date of termination of their employment.
- Therefore, two central questions are for us to decide. First, whether the employees stole and used FBC's trade secrets as part of their work at Medatech; The second is whether the non-compete clause in the employment agreement between the parties should be validated. In the course of the discussion of the above questions, we will ask whether the employees have breached the employment agreements and as a result whether they are liable for compensation to the company, and specifically in the case of employees 1, 2, 4, 5, 6, and 7, whether they are liable for the agreed compensation stipulated in the employment agreements on their behalf.
Restriction of Competition in the Light of the Basic Law: Freedom of Occupation
- Much has been written about the freedom to engage in Israeli rulings, and in essence it was determined that it is a basic right and has quasi-constitutional status.
- Freedom of occupation is not an absolute right, and in the event of a conflict between it and other quasi-constitutional rights, the need arises to strike a balance with respect to the conflicting rights.
- The employee's freedom of occupation is broad and includes, inter alia, in the context of the disputes before us, the right to work in any lawful job. However, in contrast to the right to freedom of occupation, there are the rights of third parties that may sometimes conflict with the employee's freedom of occupation. These rights include, among other things, the employer's property right in his trade secrets. The employer's property right is also broad and may include the right to protect its customers and even its employees from "bounty hunters" who seek to receive from the employer the employer's trade secrets embodied in customers or personal capital. In the proceeding before us, questions arise regarding the balance between the freedom of occupation of the employees and FBC's alleged property right in its trade secrets, a right protected by the Basic Law: Human Dignity and Liberty and from October 1999 in a specific law, the Commercial Torts Law, 5759-1999 (hereinafter: the "Commercial Torts Law").
- The Supreme Court, among other things, in the Saar case [26] and the National Court, among other things, in the Check Point case[27], have discussed this issue extensively, over the years. In the Saar case, the Honorable President Barak (as he was then called) established the principle according to which:
"First, a stipulation between an employer and an employee, which restricts the employee's freedom of occupation after the termination of his employment without protecting the employer's 'legitimate interests', is null and void as it is contrary to 'public policy'; Second, the employer's "legitimate interest" – which gives effect to a stipulation that restricts the employee's freedom of occupation – is the employer's "proprietary" or "quasi-proprietary" interest in his trade secrets and his list of customers (to the extent that it is confidential). This list is not exhaustive, and in determining the list of "legitimate interests", the relationship of trust between an employee and the employer, the proper rules of commerce, and the duty of good faith and fairness between an employee and the employer must be taken into account. Third, the protection given to the employer's 'legitimate interests' is not absolute."
- In the Check Point case, the Honorable President Adler held in this regard:
"The stipulation of restricting employment in a personal employment contract does not in itself give much weight. The stipulation should be attributed to the implications only if it is reasonable and protects the interests of both parties, including the previous employer and especially his trade secrets. In the absence of circumstances as detailed below, and especially in the absence of 'trade secrets,' the principle of freedom of occupation prevails over the principle of engagement..."
- In the Check Point judgment, the guiding rule was established according to which the employment restriction clause in an employment contract should not be given effect, unless one of the following circumstances is met, which constitute examples of an employer's "legitimate interest":
The existence of a trade secret: An employee's freedom of occupation must be restricted in order to prevent him from unlawfully using a "trade secret" belonging to his previous employer.
- Special training: In a case where the employer has invested special and expensive resources in the training of the employee and as a result the employee undertakes to work for him for a certain period of time, it is possible to justify limiting the employee's occupation for a certain period of time, as a reward for the employer's investment in his training.
- Special consideration for the restriction of employment: It is necessary to examine whether the employee received special consideration for his undertaking not to compete with the current employer in the future, upon the termination of the employee-employer relationship.
- Duty of good faith and duty of trust: Weight must be given to the good faith of the employee and/or the new employer. There is a relationship of trust between an employee and an employer. The duty of trust that an employee owes to his employer imposes on him more severe norms of behavior than the duty to exist in good faith.
- In the framework of the Check Point judgment, it was clarified that there is no need for all four tests to be met in order to limit the employee's occupation, on the other hand, the fulfillment of one of them is not a necessary condition for restricting an occupation, and that each case will be examined according to its individual circumstances.
- In the Pach ruling[28], the National Court reiterated the precedent that a contractual stipulation should not be given effect, unless the employer meets the burden of proof that the stipulation protects a "legitimate interest":
"As is well known, the Check Point rule redefined the balance of interests with regard to the possibility of restricting an employee's occupation after the termination of his employment, by establishing a new starting point. The starting point is that a contractual stipulation restricting an employee's occupation will not be validated unless the employer meets the burden and proves that the stipulation protects his "legitimate interest" (see other municipal requests 6601/96 AES System Inc. v. Sa'ar, IsrSC 55(3) 850 (2000)). If the employer proves a 'legitimate interest' – this is not enough, and the court must examine the reasonableness of the stipulation in accordance with the tests that were accepted in the past (such as the duration of the restriction, its scope, the geographical area to which it applies)" (from Labor Appeal (National) 2912-11-10 Menachem Mann - Sapir Sprint in a Tax Appeal [published in Nevo] (November 14, 2011) (hereinafter: the Sapir case)."