On 4 March 2024, the long-awaited proposal for modernizing non-compete clauses was published for internet consultation. The proposal aims to discourage the inclusion of non-compete clauses as standard provisions in employment contracts. Research indicates a significant increase in the use of non-compete clauses, which use nearly doubled in just under six years since 2015. Currently, an estimated total of over 3 million employees are bound by non-compete clauses. According to the legislator, this has led to unjustified restrictions on employee mobility and has had a negative impact on the labor market.

As expected, the proposal imposes significant limitations on non-compete clauses (including non-solicitation and anti-poaching clauses). The key changes are as follows:

1. 1. 1. Maximum duration: non-compete clauses may not exceed 12 months after the termination of employment. Clauses with a longer duration or unspecified duration will be declared void.
      2. Geographic scope: it will be mandatory to specify the geographic scope of the non-compete clause. Parties have the freedom to determine the scope themselves, but if not specified, the clause will be declared void.
      3. Justification of the non-compete clause: employers must identify significant business interests justifying the non-compete clause, even in indefinite-term contracts.
      4. Compensation: employers must compensate employees with 50% of their monthly salary (including benefits) for each month the employee is bound by the non-compete clause. For example, if a non-compete clause of 12 months is agreed upon, and the employer intends to enforce it for six months, the employer owes compensation equal to three months’ salary.
      5. Notification period: employers must inform employees in a timely manner, before the end of the employment contract, whether or not the non-compete clause will be invoked. The general rule is that the employee must know one month before the end of the employment whether the employer will invoke the non-compete clause.
      6. Transitional provisions: the principle is that non-compete clauses validly agreed upon before the new legislation comes into force will remain valid. However, the obligation to pay compensation will apply to every non-compete clause (including existing ones) invoked after the new legislation comes into effect.

After the internet consultation, the proposal must still be submitted to the First and Second Chambers of Parliament. The proposal is therefore expected to come into effect no earlier than 1 January 2025.

For questions or advice on this topic, please contact Anna Görgün (+31-6-454 408 91).

This article was published in the Newsletter Vestius of April 2024