Non-compete clause and relationship clauses in Dutch Labour & Employment Law
Non-compete (non-competition) clauses and relationships clauses in the Netherlands have our attention. Our Dutch lawyers in Amsterdam specialize in drafting and litigating non-compete or relations clauses. Many Dutch employers add non-compete clauses to employee contracts. A non-compete clause or agreement is an agreement between two parties, usually employee and employer, that the employee will not enter into or start a similar profession or trade in competition with the other party. Employers may require non-competition clauses for a variety of reasons: a non-compete clause in Dutch Labour & Employment Law protects business and can help a business retain valuable employees.
Non-compete clauses and relationship clauses in the Netherlands: reasonable scope and duration
Employers may include (in written) post-termination non-competition clauses in employment contracts for employees over the age of 18. Non-compete clauses and agreements regarding Dutch Labour & Employment Law can however not simply be a blanket prohibition from competition for an extended period of time. A non-compete clause must not infringe on a person’s ability to make a living, so it must have a reasonable scope and duration. Many jurisdictions in The Netherlands disfavor non-compete clauses as limitations on a former employee’s right to earn a living: a Dutch court may declare a part or the entire clause void if the employee is:
- unfairly prejudiced
- in comparison to the employer’s interests.
Non-complete clauses in The Netherlands are not enforceable if the non-compete clause is not reasonable with reference to the interests of the parties. The attorneys of WS Advocaten can assist you with reviewing your Non-Competes, as well as in developing agreements tailored to the unique needs of your business.
Non-competition clauses in contractor agreements
Non-compete clauses may also be a part of a contractor agreement (between a contractor and the Principal). A recent decision by the Rotterdam District Court makes clear that in that case, the rules of Dutch Labour & Employment Law do not apply to these kind of non-competition clauses:
The cantonal judge rules as follows. Although X states that the performance of the contract has characteristics of an employment relationship, it acknowledges that the legal relationship between the parties is, however, governed by a contract of assignment. This means that the provisions of Section 7: 653 of the Dutch Civil Code do not apply to the legal relationship between the parties. There is no room for an analogue application, since the support for this can not be found either in law or in case law (HR 9 July 1990, ECLI: NL: HR: 1990: AC0964).
Non-competition clause in the Netherlands reasonable?
The court always has to investigate whether a non-competition clause is reasonable. In doing so, a balance is made between the right to free choice of employment and the interests that the employer has in enforcing non-compete clauses (if the employee is unfairly prejudiced in comparison to the employer’s interests that require protection). Another common reason that courts refuse to enforce a Non-Compete is that the agreement restricts the employee from competing for an unreasonably long amount of time.
Free choice of employment
The right to free choice of employment is an important right that is enshrined in the Dutch Constitution. If the court makes a weighing of interests, all facts and circumstances of the case play a role (Hof ‘s-Hertogenbosch 8 January 2013, ECLI: NL: GHSHE: 2013BY8162). A Non-Compete with a duration of a few months will often be considered reasonable, and therefore enforceable. In this regard, a District Court considered that a non-competition clause of two years and a geographical range of 35 kilometers is not unreasonable.
Non compete clauses: interests
The subdistrict court judged that the employer has an obvious interest in enforcing the non-competition clause, since it wishes to prevent the employee from competing at the end of the contract. This is true, since the employer is located in a shrinking region.
However, when an employee is unfairly disadvantaged by a non-competition clause in view of the (often small) interests of an employer, the non-competition clause can be annulled.
Vague or confusing non-competition clause: contra-proferentem
A non-competition clause should not be too broad in scope or too vague. Many non-competes are unenforceable because they restrict competition across too broad of a territory. The clause might be unenforceable because it restricts competition in an unreasonably large territory. Such a non-compete clause might:
- be infringement of free choice of labor
- and is therefore unenforceable.
After all, the question is whether an employer has, according to Dutch Labour & Employment Law, a reasonable interest in such a broad non-competition clause. As a result when drafting, it is often better to have more limited but reliable and enforceable language than a broad but unenforceable clause. In general it could be maintained that if the contract is unclear, this will be borne by the author of the contract, District Court of Maastricht of May 17, 2010:
It is also important that the clause has been drawn up by RD4 and, bearing in mind the contra-proferentem rule, ambiguities in the contract must be brought to the disadvantage of the author of the contract. However, the starting point in Dutch Labour & Employment Law is the meaning that the parties could, in the given circumstances, reasonably give to the provision and to what they could reasonably expect from each other in that respect. According to the Supreme Court, this is not an incorrect vision (also in the case of a non-competition clause; Supreme Court 4 April 2003, JAR 2003/107).
Dutch Employment Law: worker can be compared to a consumer
The counter-profit rule (the preferred meaning should be the one that works against the interests of the party who provided the wording) has to do with bargaining between parties in unfair or uneven positions. The reasoning behind this rule is to encourage the drafter of a contract to be as clear and explicit as possible and to take into account as many foreseeable situations as it can. Contra proferentem rules guide the legal interpretation of contracts and are typically applied when a contract is challenged in court. This rule is also applicable to non-compete clauses, since the employee / contractor is the weaker party. In this respect, a worker can be compared to a consumer.
Non-competition clauses and relationship clauses in fixed-term employment contracts
As of January 1, 2015, non-competition clauses in fixed-term employment contracts are not allowed, unless they are necessary to protect a legitimate business interest. There must be a specified, reasonable motivation for the non-compete clause.
Contact our non-compete Lawyer in Amsterdam
Our Dutch Labour & Employment Contract lawyer in Amsterdam represents both businesses and individuals, whether the scope of representation involves drafting or reviewing a non-compete or non-solicitation agreement, or litigating disputes arising out of non-competition clauses.
Please contact our lawyers if we can assist you with any labour relations matters whether you are an employer or employee. Our lawyers in Amsterdam will advocate on your behalf with strong and knowledgeable legal counsel. Our goal is to resolve legal matters through a tactful negotiation, if possible, and by decisive litigation when it is not. For further information about Dutch Employment and Labour Law, please contact our Employment Contract lawyer in Amsterdam: 0031 20 5221999.