In Dutch employment agreements it is good practice to include a non-competition clause. Below is a brief explanation of what is possible and what not in this regard

Under Article 7:653 of the Dutch Civil Code it is possible in the Netherlands for an employer and an employee to include a clause limiting the latter's right to act in a certain way after the termination of the employment contract.

The inclusion of such a clause is bound by two requirements. The employee concerned must be of age (18+) and the clause must be agreed on in writing.

Although the above two conditions would seem relatively easy to meet, unfortunately, the questions of applicability and whether or not one is bound by a non-competition clause are still sometimes the subject of debate.

An employee can request the subdistrict court to annul the agreed noncompetition clause in whole or in part on the grounds of the fact that the employee is 'unreasonably harmed' by the clause in relation to the employer's interest in being protected.

As far as the way that the above criterion is interpreted is concerned, the underlying facts and circumstances must be examined case by case.

An example by way of illustration:

An employer and an employee agree that following termination of the employment contract, the employee must not enter into employment in a similar position as the one he was employed in with the employer;

 The above clause could unreasonably harm the employee in relation to the employer's interest in being protected. A case in point would be the situation of a production worker with a low level of education and a one-sided employment record.

If such an employee is bound by the above-mentioned noncompetition clause, he is in fact left without any means of earning a living. It should be taken into account that a subdistrict court would also judge such a case to be overstepping the mark.

The situation is naturally different if the above-mentioned clause is accepted by a highly-qualified employee with specific, expert qualities and skills. An example is a designer of technical equipment. In such a case too, the employee's interests will be examined. It may be obvious, however that in such a scenario, an employer would have a more weighty interest in binding the employee to the agreed noncompetition clause.

In addition to the above, the law stipulates that an employer cannot invoke an agreed noncompetition clause if he or she is liable to pay compensation, for instance as a result of having terminated the employment contract ‘wrongfully' . Among other things, this would be the case if the employer failed to employ the applicable period of notice of the employment contract bound to be observed.

In addition to the legal bases, the question of being bound by and the applicability of a noncompetition clause is naturally based on the case law in this field.

One of the most important decisions in this field dates from 1979. The High Court then ruled that if a change of a position during the course of the employment contract is of such a fundamental nature that the noncompetition clause begins to weigh more heavily, the noncompetition clause must be agreed on in writing again.

In January of this year, the High Court held that the basic principle as laid down in its ruling from 1979 still applies, but explicitly stated thereby that the court would have to examine whether there was a fundamental change in the employment relationship, and if so, the grounds on which the change would lead to the noncompetition clause weighing substantially more.

In short, the above would seem to limit the possibilities of avoiding the action of an agreed noncompetition clause.

In any case, the above shows that the question of applicability and being bound by a noncompetition clause is a continued subject of debate in the Netherlands .

Parties naturally also find themselves in a constant field of tension between an employer's justified interests in the fulfilment of a noncompetition clause on one hand, and the basic principle that an employee should not be limited in his job mobility on the other.

In discussions on applicability and being bound to a noncompetition clause it is therefore always the responsibility of all parties involved to apply the right strategy or tactics.

Practice shows that a correctly applied strategy can often substantially strengthen a certain position.

If and/or insofar as you have any questions on being bound by and applicability of a noncompetition clause in the Netherlands , please do not hesitate to contact me without engagement at any time.

S.M.J. Heeren
Lawyer at Rijppaert & Peeters
Oosterhout, THE NETHERLANDS