The Dutch government wants to change the rules regarding the use of non-competition clauses. On the one hand, the bill on modernising the non-competition clause (the Bill) must ensure that employers can continue to protect their interests. On the other hand, the Bill must prevent that a non-competition clause is included as standard in employment contracts, which limits employees on their free choice of work.
The Bill
- Limitation in duration
A non-competition clause can be entered into for a maximum of 12 months after the end of the employment contract. A non-competition clause that is entered into for a longer period is void, as is a non-competition clause that does not contain a duration. This means that no non-competition clause will then apply. - Inclusion of a geographical scope
The employer must explicitly state the geographical scope when including the non-competition clause. It is possible to agree on a minimal scope, but also possible to indicate that the scope is at a national or even global level. The geographical scope must be reasonable and sufficiently motivated. It remains possible for a judge to limit the scope if the employee claims it is too restrictive. The clause is null and void if the geographical scope is not included. - Motivation of substantial business interests in contracts for an indefinite period
The non-competition clause must state a (proper) motivation as to which of the employer’s business or service interests make such a clause necessary. Without motivation, the clause is null and void as currently applies to non-competition clauses in fixed-term employment contracts. The employee who disputes the stated motivation can apply to the court with a request to annul or moderate the clause. - Compensation when the non-competition clause is invoked
An employer must pay the employee a mandatory compensation if the employer wants to hold the employee to the clause. The compensation obligation applies for the number of months the employer decides to hold the employee to the clause. The compensation will amount to 50% of the last earned gross monthly salary, for each month that the non-competition clause is invoked. For example, if the clause is invoked for four months, the employee is entitled to a compensation of two months’ wages. - Written and timely appeal to the non-competition clause
The employer can only invoke the clause by informing the employee in writing and in a timely manner that the employer will hold the employee to the clause and for how long. This means that, in principle, an employer must inform the employee about the appeal no later than one month before the end of the employment contract. In that case, the compensation obligation as stated above arises. The employer pays the compensation due no later than the last day of the employment contract or, in the event of summary dismissal, no later than fifteen days after dismissal. - Deviations
When terminating an employment contract by mutual consent through a settlement agreement, it is common to include provisions related to the non-competition clause. That option remains available, but the Bill limits freedom of contract. For example, agreements may be made about compensation, but the obligation to limit the geographical scope and the maximum duration cannot be deviated from.
The explanatory memorandum expressly states that the Bill also relates to a non-solicitation clause that prevents employees from working for or with customers or relations of the employer and, under certain circumstances, to an anti-recruitment clause, but not to a confidentiality clause.
Before the summer, the government will explore whether non-competition clauses can be prohibited up to a salary limit of 1.5 times the modal salary for full-time employment (€ 42,236 gross per year in 2024). This amendment has not yet been included in the Bill.
The bill schematic
| Current legislation | The Bill | |
| Limitation in duration | None | Maximum of 12 months |
| Geographic scope | None | Explicitly stating |
| Motivation requirement | Only in fixed-term employment contracts | In all employment contracts |
| Compensation | No mandatory compensation | 50% of the gross monthly salary for each month that the non-competition clause is invoked |
| Written and timely appeal | No obligation | No later than one month before the end of the employment contract |
Transitional law
The date of entry into force of the changes in the Bill is not yet known. The transitional law indicates that the non-competition clauses that were legally agreed upon before the Bill’s implementation will remain in force. The terms, therefore, do not have to be agreed upon again.
After the Bill comes into effect, existing clauses will have to be invoked in writing and in a timely manner for a maximum duration of 12 months, and the employer must offer compensation for each month that they limit the employee’s free choice of work through a non-competition clause.
Whether an existing non-competition clause falls under the current legislation or the new law is determined by the moment the employer invokes the non-compete clause, not by the end date of the employment contract.
The changes proposed in the Bill have major consequences for including and invocating non-competition and non-solicitation clauses in the future. We advise you to assess your existing clauses as soon as possible. If you have any questions about your options, please feel free to contact us.
