27/9/2020
Issam worked at a jewellery store for eight years as a sales representative, but after falling out with the owner, he left for a new job at another store in the same line of business. He later found himself being sued for 50,000 Jordanian dinars (approximately 70000 US dollars) – the value of the penalty clause stipulated in his old job’s contract which denies him the right to work in a similar position for a period of 10 years upon its termination.
When Issam quit his job at the jewellery store and took up another job
he had no intention of violating the penalty clause. He was compelled
to take another job in the same sector to survive due to the lack of
work opportunities in a difficult economic market, so he had no other
way of putting food on the table. Issam says: “maintaining, restoring,
and selling silver is the only profession I know and master.”
Due to this lawsuit, Issam spent over a year dealing with litigation
procedures. Luckily for him, the court deemed the penalty clause to be
an exaggerated and an unfair one compared to the damages he caused.
The court eventually ordered him to pay 2,372JOD (approximately 3400
US dollars) as compensation for the duration of the remainder of the
fixed-term work contract, in accordance with Article 26 of the Labor
Law.
Issam is not the only employee who suffered from such unfair
contractual clauses. Many Jordanian companies violate the constitution
and the labor law by forcing their employees to sign contracts that
prevent them, after quitting, from working for other competitors for
an extended period. These contracts clearly violate workers’ rights
and are enforced due to weak oversight from the Ministry of Labor,
contradictory laws and a lack of appropriate legislation.
Attorney Faisal al-Serhan, who was Issam’s defence lawyer, relied in
his defence on Article 4 of the Jordanian Labor Law, which nullifies
the effect of any clause in the contract in which the worker waives
his rights, and on Article 819 of the Civil Law, which considers any
exaggerated clause inapplicable as they intend to keep the worker
employed for the same business owner.
Al-Serhan says that the penalty clause in Issam’s contract is legally
invalid, despite the fact that the worker willingly signed it. He
continues, that it is not a matter of will in the presence of the law,
because workers agree to such unfair conditions under the pressure of
needing work to make ends meet.
For a period of 10 years from the termination of the second party’s employment (whether such termination was with or without cause, or a voluntary resignation), the second party shall not either for himself or on behalf of any person, firm or corporation, directly or indirectly, own, manage, engage in, operate joint control, be employed by, participate in the ownership, management, operation or control of, or be connected in any manner whatsoever with any business which is competitive with the business of the first party in Al-Mafraq governorate. This covenant on the part of the second party shall be construed as an agreement independent of any other provision in this Employment Agreement, in case of breach of the no-competition clause, the contractual penalty obliges the second party to pay the fixed amount of 50,000JOD to the first party, regardless of the amount or estimated value of damage caused.
With unemployment rates bordering on 20% of the Jordanian workforce,
and according to figures published by the Department of Statistics,
accepting unfair terms in return for a good job opportunity is the
only available option. In light of this, Rami* also accepted the
penalty clause in his contract with a cellular phone distribution
company for the amount of 10,000JOD (approximately $14000). He says,
"It’s a catch-22 but the opportunity to be employed was well worth
accepting this clause."
Rami's contract prevents him from working for companies in the same
field for a period of two years starting from the date of his contract
termination. This clause made him reluctant to accept a good job offer
from a competing company. Hence he started a journey of consulting
with various parties to ensure the legality of the clause in his
contract, reaching even the Directorate of Labor in Karak governorate
where he resides. However, even there, he could not find a
satisfactory answer.
He says: "My question confused them. They spent two hours searching
the computers in front of them, then they consulted their office in
the capital Amman, and then told me ‘unfortunately, we do not know’.”
The employers legally use the no-competition clause in contracts based
on Article 818 of the Civil Law, which protects the secrets of the
trade from being disclosed to competitors. The no-competition clause
is binding if it is limited by time, place and nature of work. The
Labor Law, however, is completely devoid of any article by which the
no-competition clause is regulated in labor contracts.
Hamada Abu Najma, former Secretary General of the Ministry of Labor
and head of the “Workers' House Center for Studies”, asserts that most
contracts that use this clause violate the law, as there is a
misconception about the importance of the no-competition clause and
the legality of its application. Abu Najma notes that the use of the
clause in its present form only prevents the worker from moving on to
another job, but it does not protect the interests of the business
owner and their trade secrets.
“If the worker is performing tasks that give him access to business secrets and clients, both parties may agree that the worker may not compete with the employer or participate in any work that competes with the employer upon termination of the contract.”
Companies that use this clause in their contracts refused to respond
to us, but a lawyer who specialises in filing lawsuits for companies
that adopt such clause, spoke to us on the condition of anonymity, and
summarised the whole issue as follows: “contracts are binding for both
parties, and it is an optional clause. The courts have jurisdiction
over any lawsuit filed by the employer against the worker regarding
the no-competition clause, while the Ministry of Labor is not mandated
to decide on this matter.”
Abu Najma acknowledges that, in light of the nature of the current
Labor Law’s legal texts, the government, and particularly the Ministry
of Labor, do not have the right to interfere in any dispute within the
judiciary’s jurisdiction. This means that all disputes between the
worker and the employer, especially after the end of service, are
within the jurisdiction and discretion of the judiciary, and neither
the labor inspector nor any department at the Ministry of Labor can
interfere in resolving the dispute.
The Ministry of Labor does not have any statistic concerning the
number of no-competition clause violations, as it records them under
“non-compliance violations” within the framework of contracts and
human resources, which amounts to 494 violations. The number of
violations that were not classified and were recorded as "other"
amounted to 3,132. For the purposes of preparing its 2019 annual
report, the Ministry of Labor started the process of classifying
violations to determine those of employers' non-compliance with the
legal requirements of the no-competition clause, according to what
is stipulated in the Labor Law and Civil Law. However, the report
has not been issued yet due to the disruption of work at public
sector departments as a result of the COVID-19 pandemic.
ARIJ documented 20 legal violations of the no-competition clause
which were addressed by the judiciary and were examined before
Jordanian courts between 2009-2019. These lawsuits were filed by
companies to claim the value of the no-competition clause from their
ex-employees who left work to establish their own business or moved
on to work for the competition.
By comparing the litigation procedures in the 20 documented cases, we found a clear discrepancy in the assessment of the legality of the no-competition clause by the Courts of First Instance and the Courts of Second Instance or Appeal. In some cases, the Court of First Instance approved the clause in the contract, before being rejected by the Court of Appeal, which determined that the clause violates Article 818 of the Civil Law, as it deprives the employee of work and breach his/her freedom to work as guaranteed by the constitution.
A case file of a woman working for a recruitment company shows that
she signed a clause that prohibits her from working for another
recruitment company for a period of one year from the date of her
leaving work for any reason. If she were to break this, she would have
to pay 5,000JOD (approximately $7000) as a penalty clause. By
following the litigation procedures, it became evident that the Court
of First Instance considered the condition in the contract to be valid
and issued its decision to compel the employee to pay the value of the
penalty clause. The case reached the Court of Appeal, which decided to
annul the verdict and submit the case for re-trial as the Court of
First Instance failed to discuss the nature of the employee’s work in
the company, and failed to demonstrate the harm done to the company.
The re-trial demonstrated that the nature of the employee’s work in
the new company differs from the nature of her previous job, and that
no damage or disclosure of secrets had been proven to the court. The
court thus issued a new decision dismissing the case, rejecting the
original verdict and ruling in favor of the employee.
Human rights activist and attorney Hala Ahed, explained that the legal
texts are general and unspecific, as not all professions are subject
to the no-competition clause. She notes that this clause raises many
questions due to the conflict of legal texts regarding it, as well as
conflicts of interests. Further, due to the absence of an even
relationship between the employer and the employee, the Civil Law
takes precedence over the interest of the employer at the expense of
the worker, while Article 4 of the Labor Law stipulates that the
conditions in the work contract that detract from the employee's right
are illegal.
Mohammad Abu Bakr, Dean of the Faculty of Law at Al-Zaytoonah
University, seconds attorney Hala Ahed’s opinion, and blames Jordanian
legislators for not addressing the problems with the no-competition
clause in the labor law, and not addressing the reasons for setting up
these conditions, which he considers invalid because they are
inconsistent with the principles of the Universal Declaration for
Human Rights, the Jordanian constitution, and with the provisions of
Article 4 of the Labor Law.
The Ministry of Labor is mandated to provide legal advice to
individuals and institutions, and to conduct a periodic evaluation of
the extent of consistency of labor policies and legislation, their
compatibility with the needs of economic and social development and
their compliance with international and Arab labor standards. The
Ministry of Labor is still unable to address these problems, and its
officials do not know how to provide a satisfactory answer to those
who consult it regarding these cases. Its official response to our
questions was that "The worker has three options when filing a
grievance. The first is a complaint to his affiliated union, which has
no legal authority; the second is through the Inspection Department at
the Ministry of Labor, which compels the employer to amend the clause
if it turns out to be in violation; and the third, is to resort to
litigation at the courts."
"In light of the current laws, it is not possible to agree on a text that strikes a balance between the interest of the worker and the interest of the employer except in one case; that is only in the form of a pledge of nondisclosure of work secrets, and not a condition that restricts the worker’s freedom to work."
It is thus no surprise that companies continue to place the no-competition clause, which was established by law, in their employees’ contracts in an illegal manner; where there are no specific details of the nature of the work, or specification of the secrets feared to leak; the time period binding the worker; or where exactly he is not allowed to work. All of this places the employee who willingly signs the contract that includes this clause before two difficult options; either he leaves his job and finds himself legally required to pay the value of a penalty clause that exceeds the value of his salary multiple times, or he is forced to accept that he must continue at his workplace and see his contract through.