Non-Compete Clauses in Dutch Employment Law: What You Need to Know in The Netherlands
Non-compete clauses are common in Dutch employment contracts. But what exactly are they, and what details should you be privy to about these non-competition clauses in the Netherlands? This article provides an overview of non-compete clauses under Dutch employment law.
A non-compete clause prevents an employee from working for a competitor or starting a competing business after leaving their employer. The clause is designed to protect the employer’s business interests. However, a non-compete clause must be clear and comply with some distinct necessities for their legality under Dutch law.
This article covers key questions around non-compete clauses in the Netherlands:
Can employers use a non-compete clause in an employment contract?
Yes, Dutch employers can include a non-compete clause in employment agreements. However, the clause must be agreed upon in writing for it to be valid.
The purpose of such a clause is to prevent unfair competition from former employees. But employers cannot enforce a non-compete clause without limitations. Restrictions must be reasonable and necessary to protect legitimate business interests.
What constitutes a legitimate business interest for a non-compete clause?
Dutch law acknowledges merely three legitimate employer’s interests for non-competition agreements:
- Safeguarding trade secrets or confidential information
- Protecting client relations that require special trust
- Preventing unfair solicitation of employees away from the company
If a non-compete clause serves different purposes, Dutch courts may rule it invalid.
Can employers use non-compete clauses in all employment contracts?
No. Non-compete agreements are only valid in permanent employment contracts under Dutch law.
Employers cannot impose post-term non-competes in fixed-term employment agreements. This includes most temporary contracts.
However, employers can include non-solicitation clauses in fixed-term contracts. These prevent former employees from poaching clients or staff. But solicitation restrictions still must adhere to reasonableness standards.
How long can a non-compete last in the Netherlands?
Dutch law does not specify an exact time limit for non-compete clauses. Duration depends on the interests at stake and industry practices.
Non-competes exceeding one year are rare. Many Dutch employers opt for 6-12 month restriction periods. But even shorter non-competes can safeguard legitimate aims.
Courts assess each case individually, considering the employer’s needs against the impact on the employee. Overly long or broad non-competes often fail this balancing test.
Which activities can employers restrict through a non-compete clause?
Non-competes cannot ban any commercial activity that disadvantages the former employer. Restrictions must remain proportionate to identified business interests.
For example, a non-compete may prevent contacting former clients or working in product development. But it cannot bar someone from utilizing their general professional skills.
Judges narrow overreaching non-compete clauses to make them enforceable. But employers should draft agreements prudently to begin with.
Are employees obliged to comply with non-compete clauses under Dutch law?
Yes, employees must adhere to reasonable non-compete agreements made as part of an employment contract. Violating contractual loyaly duties can enable damage claims from the employer.
However, former employees can contest disputed non-compete clauses in court. If judges find the restrictions unnecessary or overly strict, they will render the clause invalid.
Employees should therefore consider legal support when facing extensive non-compete barriers after leaving a job.
Can employers claim damages for breaching non-compete clauses?
Dutch law allows damage claims against employees violating valid non-compete agreements. Compensation often equals the profits lost due to improper competition.
However, employers carry the burden of proof. They must demonstrate actual losses relating to the breach of non-compete duties.
Dutch courts also reduce damage awards if employers contributed to their own harm. For example, by failing to keep business secrets truly confidential.
What alternatives exist besides non-compete clauses?
Instead of non-competes, employers can use:
- Non-solicitation agreements in fixed-term contracts
- Confidentiality clauses for trade secrets
- Return-of-property contracts for commercial assets
- Garden leave provisions to bridge sensitive transitions
More flexible instruments often achieve similar employee loyalty aims. Consultation with an employment lawyer in the Netherlands can help identify suitable options.