Modernisation of the non-compete clause

A study has shown that non-compete clauses are often included as standard clauses in employment agreements, without consideration of whether those employees actually have access to the knowledge and relations that could impair the employer's competitive position. In addition, the non-compete clause is regularly used improperly: to prevent employees who are difficult to replace from leaving. 

This has prompted the government to introduce the Draft Bill on the Modernisation of the Non-Compete Clause (Ontwerpwetsvoorstel modernisering concurrentiebeding, in Dutch). The draft bill attaches stricter conditions to non-compete clauses and aims to strengthen employees' legal position. 

Main measures from the draft bill

• The maximum duration for non-compete clauses is one year, calculated from the end of the employment agreement. Accordingly, employers and employees cannot agree a longer period.
• The non-compete clause must explicitly define the geographical area in which the limitation applies, to prevent employers from imposing an overly wide or vague area on their employees, which would limit them in their career choices.
• The written non-compete clause must substantiate which vital business or service interests justify the limitation. This applies to all employment agreements, including those for an indefinite term, and not just to fixed-term contracts, as is currently the case. The substantiation must be specific and up to date, and indicate why the non-compete clause is necessary to protect the employer.
• The employer must inform the employee in writing well in advance (no later than one month before the end of the employment agreement) whether they will be invoking the non-compete clause and for what period. 
• The employer must pay compensation to the employee if they actually invoke the non-compete clause. The compensation will be at least half the employee's salary for each month that the non-compete clause is in force, or any higher amount to be agreed. The compensation must be paid no later than on the last day of the employment agreement or within 15 days of its termination. If the employer does not pay this compensation or pays it too late, the non-compete clause will lapse. The compensation will not be owed in the event of a seriously culpable act or omission by the employee or if the employee does not meet the conditions set out in the clause. If, in that situation, the employer has already paid the compensation, this will become an undue payment as soon as the employee breaches the clause's conditions.
  
   

Termination agreement

It will still be possible to make different arrangements in a termination agreement. For example, the parties can agree that no compensation or less compensation will be paid.

However, no different arrangements can be made about the clause's maximum duration, its geographical scope or the obligation to substantiate the limitation.

Scope

Uit de memorie van toelichting bij het ontwerpwetsvoorstel wordt expliciet vermeld dat het wetsartikel ook betrekking heeft op het relatiebeding dat ex-werknemers ervan weerhoudt te werken voor of bij relaties van de werkgevers, en onder omstandigheden op het anti-ronselbeding. Dit is een beding dat ex-werknemers verbiedt om werknemers van zijn oude werkgever ertoe te bewegen elders in dienst te treden. De literatuur en jurisprudentie laten een wisselend beeld zien over de vraag of en wanneer een anti-ronselbeding onder de reikwijdte van artikel 7:653 BW valt. Het wetsvoorstel is op dit punt niet helemaal duidelijk.

Een geheimhoudingsbeding valt echter volgens het wetsvoorstel in ieder geval niet onder 7:653 BW.

Overgangsrecht concurrentiebedingen

The explanatory memorandum to the draft bill expressly states that the statutory provision also extends to the non-solicitation clause (which aims to prevent former employees from working for or with the employer's relations) and, under certain circumstances, to the non-poaching clause. The latter clause prohibits former employees from encouraging their former employer's employees to enter another organisation's employ. The literature and case law are divided about whether and when the non-poaching clause falls within the scope of Article 7:653 of the Dutch Civil Code. The bill is not entirely clear on this point.

However, the confidentiality clause does not come under Article 7:653 of the Dutch Civil Code in any event, according to the bill.

Transitional law

The draft transitional law provides that existing non-compete clauses will continue to be governed by the current rules: non-compete clauses agreed before the Act's entry into force that have a duration of more than one year, state no geographical scope and (in employment agreements for an indefinite term) do not substantiate why the non-compete clause is necessary do not need to be renegotiated and amended.

However, the provisions on invoking a clause and paying compensation will apply once the bill has been enacted into law. Briefly put, this means that even if the non-compete clause is an 'old' one, an employer will have to pay for invoking it. 

During negotiations on the Job Market Policy (Arbeidsmarktbeleid), the Dutch House of Representatives passed a motion to ask the government to investigate whether non-compete clauses could be prohibited below a minimum salary threshold (1.5 times the modal wage). The government indicated that it would respond before the summer.

Responses to the draft bill can be submitted until 15 April 2024.