News Update Employment & Pensions

It has been a while since the Dutch House of Representatives passed a motion asking the government to explore how to ensure the non-compete clause is used only when strictly necessary.

The study then conducted showed that many employers use non-competes as a standard clause in employment agreements, even when employees do not have access to any knowledge or relations that could impair the employer's competitive position. The clauses frequently stipulate a term of more than a year and include multiple fines.

In addition, many employers turned out to use the clause improperly: to prevent employees who are difficult to replace from leaving. Last year, the Dutch Supreme Court ruled (in Dutch) that the non-compete clause serves to protect organisations' market position (including accrued goodwill, know-how and business relations) and not to bind employees. Not even when a tight job market has made it more difficult for employers to find replacements.

On 2 June 2023, Minister Van Gennip of the Ministry of Social Affairs and Employment sent a letter to the Dutch House of Representatives stating that she would incorporate the following changes into a bill:

• Statutory time restrictions for non-compete clauses will be introduced.
• The non-compete clause must be geographically delineated, specific, and substantiated in the employment agreement.
• In employment agreements for an indefinite term, employers must also explain what substantial business interests are served by the non-compete clause. This is consistent with today's practice for fixed-term employment agreements.
• If an employer invokes the non-compete clause against an employee who is leaving, the employer must compensate them. This payment, which will be a legally defined percentage of the employee's most recent salary, will make employers think twice about including and invoking a non-compete clause.
  
  

The bill will likely be submitted for online consultations at the end of 2023.