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The US-Israel Legal Review 2019 75
provides legal protection to trade secrets. The law
provides that theft of a trade secret is a civil tort that
may entitle the plaintiff to several types of remedies,
for example: injunction, monetary compensation,
including statutory damages of up to NIS 100,000,
without having to prove that damages were caused,
and seisure of property. The employee’s obligation
to preserve the employer’s trade secrets also results
from an employee’s duties of good faith towards the
employer, which are recognised by case law.
In addition to the protection provided by the law,
the employer may increase the level of protection
through contractual means. In employment
contracts in Israel, it is very common to find
provisions relating to the employee’s obligations
regarding nondisclosure, noncompetition and
protection of intellectual property. Furthermore,
there are companies that adopt security procedures
that may assist to prevent the theft of trade secrets.
From a practical aspect, it is recommended
that at the end of the employment relationship, the
employer should insist on receiving all the relevant
documents and data from the terminated employee
as well as ensuring that the employee has no access
to the employer’s computer systems (so that he/
she will not be able to steal trade secrets after the
termination of employment).
As a general rule, covenants not to compete
or solicit are rarely enforced in Israel. In general,
Israeli law prefers,
prima facie
, the employee’s
freedom of occupation over the employer’s right
that a former employee will not compete with
it. Accordingly, an employee is prohibited from
competing with a former employer only if such
competition may harm a legitimate interest of the
employer (such as the breach of trade secrets).
Israeli case law stipulates that non-compete
covenants incurred by employees will not be
enforced unless there are specific circumstances,
such as the following:
1. the former employer owns a trade secret that is
unlawfully used by the employee;
2. the former employer has invested unique and
valuable resources in the employee’s training;
3. upon termination of the employee’s employment
with the former employer, the employee received
special consideration in return for his or her non-
compete undertaking; and
4. when a balance between the extent of the
employee’s good faith in taking the new position
and the employee’s obligation of fidelity towards
his or her former employer indicates that the
enforcement of the employee’s non-compete
covenant can be justified.
In this respect, the courts will also consider the
position of the employee and the field in which the
employer operates.
The enforcement of the non-compete covenants
in section (2)–(4) above will only be upheld if the
employment contract includes an appropriate non-
compete covenant (while in the situation in section
(1), there may be a possibility to enforce the non-
compete covenant even in the absence of a non-
compete clause in the employment contract).
Naturally, as noted above, when the employee:
(a) is more senior; (b) was more exposed to the
former employer’s technology; and (c) received
higher compensation, then the likelihood of
enforcement increases (but only under very
exceptional circumstances).
In any event, even if a court decides to enforce a
non-compete covenant, the enforcement will only be
with respect to an obligation that can be considered
as reasonable in the scope of employee’s position,
time and geographical limitation. The court also has
the power to re-draft the non-compete obligation in
order to make it more reasonable.
n
ABOUT THE AUTHOR
Orly Gerbi
established and now heads HFN’s
Labour & Employment Department, with over 20
years of experience in the field. Widely-regarded
as the leading employment law attorney in
Israel, Orly advises international and domestic
clients in the public and private sectors on all
aspects of labour and employment law and labour
relations, as well as employee benefits, executive
compensation, collective relations, pensions,
privacy and immigration.
CONTACT:
Orly Gerbi
T: +972 3 692 2045
E: gerbi@hfn.co.il
www.hfn.co.il