Here is what you need to know about the non-compete clause

If you work in the Netherlands, you may have run into a non-compete clause in your employment agreement. Elfi Lawyers tells us what we need to know about this clause.

The non-compete clause is regulated by law in Section 7:653 of the Netherlands Civil Code (BW). In paragraph 1 of this article, a non-compete clause is defined as a stipulation existing between the employer and the employee, restricting the employee in their entitlement to certain types of activity or employment on termination of the agreement.

Are there restrictions to a non-compete clause?

This definition in the civil code may give rise to the notion that a non-compete clause is a far-reaching measure. This is true to some extent; the non-compete clause is in fact a restriction of one’s right to free choice of work as laid down in Section 19 paragraph 3 of the Netherlands Constitution.

Still, the legislaion has not been prepared to prohibit a non-compete clause in agreements. But certain restrictions have been imposed, while in certain cases the court may decide to reduce the scope of the non-compete clause at issue.

Valid restrictions that may be imposed on a non-compete clause are included in the same section of law, to the extent that a non-compete clause is valid only if the employment agreement is for an indefinite period and has been agreed in writing between the employer and an employee of age.

Conditions for a non-compete clause

The above demonstrates that a non-compete clause is valid only if three conditions have been met:

Indefinite period

The first condition is that the employment agreement must be for an indefinite period. If this is not the case - and the employment by consequence is for a definite period - a non-compete clause is allowed to a certain extent only.

Recorded in writing

The second condition is the requirement of an agreement recorded in writing. The non-compete clause must have been agreed upon in writing between the employee and the employer. The underlying notion is that the employee has been in a position of carefully considering the consequences of the onerous clause in the agreement.

The Netherlands Supreme Court has ruled that the requirement of a written agreement has been met if the employee has signed an employment agreement including a non-compete clause, or has entered into another employee benefits scheme which includes said non-compete clause, as in these cases the employee gives proof of having been informed of the written non-compete clause imposed on them, and has consented to this non-compete clause.

As a consequence, the requirement of a written agreement does not necessarily imply that the non-compete clause must actually be included in the employment agreement. The employment agreement itself may refer to a collective bargaining agreement (CAO) or another employee benefits scheme which includes this non-compete clause.

Being of age

The third condition for the validity of a non-compete clause is the employee being of age. Possible invalidity is not lifted if a person underage was authorised by their legal representative to consent to the non-compete clause at issue.

Important to remember

Last, but not least, it is worth mentioning that a non-compete clause may be entered into at the commencement, during the term or upon the termination of the agreement between the employer and the employee.

Are you an employer or employee and do you have questions about an issue relating to employment law? Then do not hesitate and contact Elfi Lawyers without any obligation involved!