Non-competition - under Dutch employment law

What is a valid non-compete clause under employment law in the Netherlands?

Non-compete clauses in employment contracts, are provisions which act to prevent an employee from entering new employment with a competitor in similar industries/markets upon termination of their employment agreement. The main purpose of this, is to protect an employer's business interests, from the departure of a worker who has familiarity with the company’s operation.

Enforceability of a non-compete clause under Dutch law

For a non-compete to be enforceable under Dutch employment law, it must be agreed upon in writing between the employee and the employer. The employee, in signing this agreement, must be of sufficient age and competency. In addition, the courts will generally weigh the interests of the employer against that of the employee in determining the clauses’ enforceability.

A court may moderate the clause in case an employee starts proceedings to annul or moderate the clause because of its consequences. The court will balance the interests of both the employer and the employee. In these proceedings, the term, (geographical) scope and penalty can be moderated by the court.

In comparison to other European countries there is no statutory compensation under Dutch law to be paid by the company in case the employee will be held to the non-competition clause.

Under Dutch employment law the type of employment contract in question will also determine the validity of these clauses. Since January 2015, non-compete clauses in temporary employment contracts entered into after this date are now usually deemed unenforceable in the Netherlands. A departure from this new rule can only be justified on specific grounds, such as commercial necessity, which reasoning must be made in writing The courts rule very strict on the validity of these exceptional grounds, a written reasoning is seldom accepted.

The Scope of a non-compete clause under employment law in the Netherlands

In considering the scope of a non-compete clause under employment law in the Netherlands, it is most effective to observe the geographical and temporal scope in the agreement. When determining the extent of a non-compete clause, both the targeted area and duration of the clause must be limited in line with what is reasonable for the industry and the employee.

The general timeframe for these clauses in Holland is on average a year, but in some instances, this can reach two years, depending on the case at hand.

Non-solicitation clause under employment law in the Netherlands

It is prudent to also consider the operation of non-solicitation clauses when assessing the non-compete clause in The Netherlands. Similar to the non-compete, the non-solicitation clause is designed to restrict the actions that can be taken once an employee leaves a company. In this instance, the clause prevents the employee from performing the activities and role he held in the company, for the customers or clients of his former employer. Dutch employment law generally will use the same methods to evaluate the legitimacy of a non-solicitation clause as a non-compete clause.

It should be stressed that the wording of such clauses can be paramount in deciding their validity and enforceability under Dutch employment law. Thus, it is advisable to consult legal experts in the Netherlands for any legal issues arising out of this type of contractual provision.