A company engaged in coordinating and managing the collection of development levies for local authorities and water corporations entered into an agreement with a partner, which included broad non-compete and confidentiality clauses. After the partnership between the parties ended, the partner began working in the same field through another company.
The Court held that the non-compete clause is void and even refused to reduce it to a reasonable scope. Free competition and freedom of occupation are fundamental values in the Israeli legal system. For a non-compete clause to be upheld, the employer (or the party imposing the restriction) must prove that it is designed to protect a "legitimate interest," such as trade secrets. A "naked" restriction intended solely to prevent competition will be struck down. Additionally, a non-compete clause may be deemed legitimate if "special consideration" was provided in exchange for the occupational restriction or if "special training" was involved. In this case, the company did not utilize unique work methods or rely on secret technology, the client list, being comprised of local authorities was not confidential, nor did the company provide the partner with special consideration or special training that would justify imposing the non-compete clause. Furthermore, when a party drafts a broad and abusive clause without a legitimate interest, there is no justification to assist them and legitimize the practice by retroactively narrowing the restriction's scope.