Understanding non-compete clauses in Dutch employment contracts

Whether you are a business owner trying to protect your interests or a new employer entering into an employment contract, understanding non-compete clauses is essential. Robert M. Berendsen of Mr. Berendsen Lawyer provides information on what these clauses entail and how they can be applied within the Dutch legal framework.

A non-compete agreement is typically established to protect an employer against a former employee using inside information to benefit a competitor. However, its legal enforceability depends on the nature of the employment contract, the circumstances under which the employment agreement terminates, and the applicable law. In this guide, I will focus on agreements subject to Dutch law.

Non-compete agreements in permanent contracts: Key points to consider

A non-compete agreement is more likely to be enforceable when it is part of an open-ended employment contract, as long as the criteria are met. The clause must be in writing and agreed for a specific job. If your job changes substantially, the agreement must be renewed for it to remain applicable. That’s why employers ask employees who accept a big promotion to sign a new non-compete agreement.

Restrictions and proportionality: what is fair?

The types of acceptable restrictions depend largely on both the type of business and the type of work. A dentist could be banned from setting up shop within the same village or within a 10 kilometer radius of the employer’s office for six to 12 months, while a high-frequency trader or analyst could be banned from working in a similar job anywhere in the world for one or two years.

In the Netherlands, proportionality plays a key role in the assessment of non-compete clauses. Courts evaluate whether the restrictions imposed are reasonable in relation to the employer’s need to protect business interests and the employee’s right to pursue career opportunities. In the Netherlands it is rare to see restrictions lasting more than a year.

Additional rules for fixed-term employment contracts

Fixed-term employment contracts impose more restrictions on the application of non-compete clauses. The law prohibits non-compete clauses in these contracts, but allows exceptions in cases where the employer can demonstrate that they are essential to the business. This justification must demonstrate that in this specific case, for that specific job, the non-compete clause is essential.

Many employers who attempt to use this exception fail in their justification: courts reject many justifications as insufficiently specific.

Financial compensation

Although current law does not provide for specific financial compensation for employees who suffer substantial limitations as a result of a non-compete clause, the court may, if requested, decide on equitable compensation.

In recent years, the previous government and parliament initiated a debate on amending the law regarding post-contractual limitations for employees, such as non-compete clauses. A draft revision of the law has been discussed, but it is unclear whether it will ever become law.

However, many employers have taken essential elements of the proposed law very seriously, namely that non-compete clauses must always be justified in writing, also in contracts of indefinite duration, and that employers must pay a fixed remuneration equivalent to half of the employee’s highest salary. recent salary.

Challenging a Non-Compete Clause: Your Options

Someone who has agreed to a non-compete clause can challenge its validity or its scope and duration in court, in addition to seeking financial compensation. In many cases, such motions are adjudicated by suspending, modifying, or limiting the effects of the non-compete clause.

Get advice when changing jobs

Many expats with high-skilled immigrant visas and 30 percent rate jobs sign non-compete clauses without giving it much thought. Then, when they want to take a leap in their career, they realize that they may not be able to do it as easily as they had assumed. Particularly if they have tax and visa limitations, this can become a serious problem.

If this is you, before you sign anything, be sure to consult an attorney to know what you are about to sign. This applies whether to verify the original non-compete clause, or if you are starting a new job that could put you at risk of receiving a fine for violating a non-compete clause.

If you need advice when starting a new job, or drafting an employment contract with a valid and fair non-compete clause, contact Mr. Berendsen Lawyer for advice tailored to your situation.