Internet consultation Bill to Modernise Non-Competition Clause from 4 March to 15 April 2024

It is proposed by the Dutch government that a non-competition clause can be agreed for a maximum of one year, that the compelling business and service interests must always be justified and that the employer must pay compensation to the employee. The following is a point-by-point discussion of the draft proposal.

The regulation of the competition clause in article 7:653 of the Dutch Civil Code is amended as follows

A non-competition clause is void unless the written motivation included in the clause shows the following:

(1) the period (in whole months) with a maximum of 12 months;

(2) the geographic scope; and

(3) due to which compelling business or service interests the employer considers the restriction necessary. This third requirement already applies to employment contracts for a fixed period, and will thus also apply to employment contracts for an indefinite period.

Furthermore, it remains the case that the non-competition clause is only valid if it has been agreed in writing with an adult employee.

Subsequently it is arranged:

• that the clause is only valid if and as long as the employer invokes it;
• that the employer can only invoke the clause if he informs the employee in writing in a timely manner (no later than one month before the end of the employment agreement) that and for which period he invokes the clause;
• that the employer cannot invoke the non-competition clause if the employment agreement ends/is not continued as a result of the employer’s seriously culpable acts or omissions (this also applies under current law);
• that the employer owes the employee compensation of half a month’s salary for each month that the restriction lasts (or a higher amount if agreed).

Article 7:653 further contains:

• provisions regarding when the compensation must be paid and when the employer no longer owes the compensation (in case of serious culpable conduct by the employee or violation of the clause);
• provision that the court can annul the clause in whole or in part if (1) the restriction is not necessary because of compelling business or service interests, or (2) if the employee is unfairly disadvantaged by the clause in relation to the employer’s interest to be protected (this is the current paragraph 3 of Article 7:653 Dutch Civil Code).

This bill aims to achieve the following:

• A reduction in the use of the number of (unnecessary) clauses, promoting free choice of employment, labour mobility and optimal labour allocation.
• Balancing the interests of employers and employees.
• Providing more legal certainty so that the rights and obligations of employers and employees are clear in advance, reducing the need to go to court.
• Maintaining the possibility for employers to protect their business operations.

Now that the internet consultation has been closed, we will have to wait and see when the bill, whether or not in amended form, will be submitted to the House of Representatives. We shall keep you informed of the progress.