Tuesday 04 October 2022

What you need to know about having a non-compete clause

Photo: Depositphotos.com

One in three employees in the Netherlands has a non-compete clause in their employment contract. What should you be aware of if you are one of them? Seliz Demirci from GMW Lawyers explains.

A non-compete clause in an employment contract prevents an employee from working for a competitor after their employment has ended. A clause usually lasts for a period of six months but could run for several years.

If you break the clause by changing jobs for a rival firm, you could find yourself facing legal action and a potential penalty of up to several thousand euros

Tight labour market

A growing number of employers are using non-compete clauses to prevent employees from leaving their company in today’s tight labour market. You may not be happy about signing one, but employees often do so because they are worried about losing the position or damaging the relationship with their new employer.

Nevertheless, you need to be aware of the potentially far reaching consequences if you do sign. For this reason, the law imposes strict conditions on non-compete claused. For example, a valid non-compete clause must be agreed in writing with an adult employee. The law also distinguishes between non-compete clauses in temporary contracts and contracts for an indefinite period.

If you have a temporary employment contract
In order to prevent a temporary employee from being bound by a non-compete clause too easily, stricter requirements have been set for agreeing to such a clause.

The employer must have compelling business interests to include a non-compete clause in a temporary contract, and must explain the reason for these interests in the clause.

The requirement to explain the reasons is very strict: the courts will not accept generally formulated business interests. The employer is also required to customise its business interests specifically to the work performed by the employee.

This means that the employer must make a specific assessment of the necessity of a non-compete clause in each individual case. This need must be proven not only at the time of entering into the non-compete clause, but also when the employer invokes the clause.

If you have a permanent employment contract
An employer does not have to give reasons for applying a non-compete clause to an employment contract for an indefinite period.

However, an employee may request non-compete clause be suspended if he or she want to leave their job and their choice of new employment is disproportionately affected by the clause. The employer’s interests in enforcing the non-compete clause are then compared with the employee’s right to work for the company of their choice.

This means that even in the case of an employment contract for an indefinite period, your employer is still required to provide reasons for a non-compete clause, should the issue come to arbitration. The difference with a temporary contract is that the employer is not obliged to provide reasons for its interests as part of the text of the clause itself.

Do not automatically agree to a non-compete clause
It is not uncommon for courts to suspend a non-compete clause even though it has been properly agreed.

Nevertheless, it is unwise to automatically agree to a non-compete clause without taking advice. After all, nobody benefits from a discussion afterwards about its validity and scope.

Moreover, as an employee – if your employer claims the agreed penalty from you – you will have to go to court yourself to have the clause suspended. This is costly and time-consuming at a time when you may have already found new employment and want to start soon.

Negotiating your non-compete clause
Before signing a non-compete clause, make sure you are aware of the consequences of doing so when your period of employment ends – whether you have a permanent or temporary contract.

If the clause seems too vague or general to you, or if the term is too long, you should have the clause checked by an employment lawyer. It may be possible to have the clause removed from the employment contract or to have its term and scope adjusted.

If you have agreed to a non-compete clause and you want to make the move to a potential competitor, you should obtain legal advice to assess your options. Even at this stage, a lawyer can also advise you on negotiating with your employer to have the clause removed or amended.

Experts in expat employment law
GMW lawyers has a team of experts in (international) employment law who can help you to work it out. Call us on 070 361 5048 or visit our website for further information.

More from GMW Lawyers
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Coronavirus at work: can you boss ask if you have been vaccinated?

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