A non-competition clause, non-compete clause or covenant not to compete (in Dutch concurrentiebeding) is a contractual provision under which an employee is prohibited from entering into employment for a competitor following the end of his or her employment with his or her current employer. A non-compete clause must be made in writing in the individual employment agreement and is intended to protect the employer’s business interests. These provisions generally include one or more limitations on the kind of employment that the employee is permitted to carry out within a specific geographical area over a specific period of time. As a matter of common practice in the Netherlands, the non-compete term imposed by a non-compete clause is 12 months.
Non-compete clauses are generally not valid in temporary employment contracts, unless the employer is able to justify, in writing, the necessity of the non-compete clause due to important operational or commercial reasons. This justification obligation is aimed at preventing employers from making light use of such non-compete clauses. A non-compete clause that fails to comply with this standard is void.
In determining whether the reasons set out in the non-compete clause are sufficient to justify the non-compete clause, the courts will balance the interests of the employer against those of the employee.
Note: this restriction does not apply to contracts entered into before 1 January 2015.
While the law only imposes a specific justification obligation on non-compete clauses, the literature and the legislative history of this provision indicate that non-solicitation clauses are also deemed to fall under this category, and as such are subject to the same rules as non-compete clauses. It is therefore advisable that non-solicitation clauses in temporary employment contracts, like non-compete clauses, also include a justification of the reasons for the provision.
The duty of justification does not apply to non-compete clauses in permanent employment contracts.
It is a common misconception that the courts will simply look the other way when it comes to non-compete clauses and find in favour of the employee. However, if a former employee starts putting his or her expertise, know-how, knowledge of business secrets and customer contacts to use for a competitor a couple of doors down, the courts are likely to allow the employer to protect its interests and may prevent the ex-employee from performing work for the competitor.
Employees and employers alike should be wary of the wording and justification of their non-compete clauses and non-solicitation clauses (the justification for these clauses may be crucial to ensuring their legal effect).
The Dutch employment lawyers at Blenheim are experienced in advising on non-compete clauses and other post-contractual clauses, such as non-solicitation clauses and confidentiality clauses.
For questions concerning non-compete clauses, please contact our employment law attorneys here.