Non-compete and non-solicitation clause

Most employers want to prevent that employees, during their employment and after leaving the company, use the company information they have gained for the benefit of another (competing) company or their own business.

To prevent this from happening, the employer can enter into a non-compete and/or non-solicitation clause with the employee. In brief, a standard non-compete clause states that the employee is not allowed to work for his/her former employer’s competitors for a certain period of time after the termination of employment. A non-compete clause often also contains a penalty clause in the event that the employee breaches the non-compete clause. In any case, the non-compete clause must meet the following requirements:

• Agreed in writing
• With an employee that is 18 years or older
• Included in a permanent employment contract, or;
• Included in a fixed-term employment contract including a provision stating that, and why, the employer has a substantial business interest in this particular clause with this particular employee.

A non-solicitation clause is a type of a non-compete clause and must also meet the above requirements. In brief, a non-solicitation clause prohibits the employee from maintaining (business) contacts with his employer’s business relations after leaving the company.

When entering into a non-compete and/or non-solicitation clause, it is important to ensure that the clause is drafted in line with the employee’s position and the employer’s business/industry. Even though the clause may meet all the requirements, the court may still weigh up the parties’ interests and rule that the employee cannot be made to comply with the clause. To avoid this, it is important that the clause is not formulated too broadly. If you are not sure whether your non-compete or non-solicitation clause sufficiently protects your interests and will hold up in legal proceedings, we will be happy to review the clause for you. Also, if the employee’s position or the employer’s business services, have changed significantly, it is important to adjust the non-compete and/or non-solicitation clause in the interim or enter into it again.

In 2015, the legislation on the non-compete clause was amended with the introduction of the Dutch Work and Security Act (WWZ). The requirement to state reasons was introduced for non-compete clauses in fixed-term employment contracts. For several parties, these amendments were insufficient. Subsequently, in 2021, research was conducted into the operation of the non-compete clause in labour law, resulting in the report: “The operation of the non-compete clause” (De werking van het concurrentiebeding | Rapport | Rijksoverheid.nl). During the presentation of the cabinet’s plans for 2023 on Budget Day (‘Prinsjesdag’), the cabinet expressed its intention to further work out an amendment to the non-compete clause. The aim is to inform the House of Representatives about this in 2023.