Many employees are held to a non-competition clause. Research shows that one in three employers uses such a clause. The non-competition clause is laid down in article 7:653 of the Dutch Civil Code and prohibits an (adult) employee from working at companies competing with the employer after the end of his employment contract for a certain period of time. 

Research agency Panteia published a report in 2021 following a study on the operation of the non-competition clause in practice. This research revealed (among other things) that the use of the non-competition clause is so broad that it could lead to an unjustified restriction of employees. This is - especially in times of a labour market shortage - an undesirable consequence, Van Gennip states in a letter to the House of Representatives (Kamerbrief) dated 2 June 2023. The non-competition clause should only be used for actual protection of a necessary business interest (such as, for example, trade secrets), instead of being included as a standard clause in employment contracts. Van Gennip also stresses the importance of making it clearer in advance to parties when a non-competition clause can be included, and when it can be invoked by the employer, as a result of which legal certainty should be increased.

Van Gennip announced that a bill will be prepared to modernize the non-competition clause. The following changes will be worked out:

  1. legally limiting the non-competition clause in duration; 
  2. including, specifying and justifying the geographical scope of the non-competition clause; 
  3. justification of a substantial business interest when including a non-competition clause, even in an employment contract for an indefinite term (this requirement currently only applies to fixed-term employment contracts); and
  4. If the clause is invoked, an employer will in principle have to pay compensation, set at a percentage of the employee's last-earned salary determined by law.

When outlining the policy options to the House of Representatives, the possibility was initially mentioned that in the event of the employer's bankruptcy, the non-competition clause would lapse. According to Van Gennip, however, insufficient account is taken of the fact that an employer - even in the event of bankruptcy - may have a compelling interest in keeping the employer bound by the non-competition clause. Further research will be conducted in this regard. 

Two other policy options will not be developed any further: the option that the non-competition clause can only be invoked if dismissal takes place at the employee's initiative and the option that the non-competition clause lapses in the event of dismissal during the probationary period. According to Van Gennip, these options do not sufficiently protect the interests of employers. It is expected that the legislative proposal will be presented for internet consultation at the end of 2023.

We will of course keep you informed about any developments in this area.