In a parliamentary letter on 2 June 2023, the government announced its intention to change the rules around the non-compete clause. The proposed plans are addressed in this article.

What is a non-compete clause?

Many employers agree on a non-compete clause with their employees in the employment contract. The purpose of the non-compete clause is to prohibit an employee from joining a competitor or performing similar work for another company after the end of the employment contract. It is also common for a non-solicitation clause to be included in the employment contract, prohibiting the employee from contacting customers or business relations of the employer. This non-solicitation clause is also considered a non-compete clause from a legal perspective.

Plans to change the law

Ministerial surveys have shown that employers make extensive use of the non-compete clause, also in situations and for positions in which it does not appear to be necessary. As a result, they are able to place unreasonable restrictions on employees. Moreover, the job market is currently tight. By making frequent use of the non-compete clause, employers are trying to retain scarce and sought-after employees, even though that is not the original purpose of the non-compete clause. This, in turn, makes it more difficult for the employee to change jobs, as a result of which the job market does not function optimally and employees may not end up in their ideal positions. It is therefore common in this regard for a court to set aside a non-compete clause in a situation in which an employer states that it wants to keep the clause in place, because it is having trouble finding a replacement — which is expressly not the purpose of a non-compete clause!

The government now intends to change the rules in question in order to curb the unnecessary and improper use of the non-compete clause.

Proposed changes

The proposed changes include the following points:

1. 1. 1. The duration of the non-compete clause will be limited (the exact duration is not specified in the parliamentary letter).
      2. It will be mandatory to agree on a specific and reasoned geographical scope of the non-compete clause. The general description that the clause applies to “the Netherlands as a whole” will therefore no longer suffice.
      3. As in the case of fixed-term employment contracts, employers will also have to justify the compelling business interest in open-ended contracts. They must therefore state why it is necessary to agree on a non-compete clause. Practice shows that this justification will have to be extensive and may not be a general description that the company uses for all its employees. It will therefore most likely have to be job-specific and individually motivated.
      4. When invoking a non-compete clause, the employer will have to pay the employee fixed statutory compensation. It is envisaged that this amount will be a certain percentage of the employee’s last-earned salary.

Expected timing

The bill was in preparation at the time the government fell, with the Minister of Social Affairs and Employment expecting to submit the bill for internet consultation by the end of the calendar year. This will now most likely be delayed. The expectation is, however, that a next government will continue along the same path, since it is a widely supported wish in political The Hague that the regulation of the non-compete clause be revamped.

We will of course keep you updated on further developments.

Please contact Bart de Vroe (+31-6-203 662 43) for more information on this subject.

This article was published in the Newsletter Vestius of August 2023