How a non-compete clause helps protect your business

A non-compete clause is an agreement in the employment contract. It ensures that an employee cannot join your competitor or start their own business in the same industry after their employment with you ends. This helps to keep important information within your business.

In a non-compete clause, you can make agreements about:

• Duration: how long does the clause apply after departure?Usually 1 to 2 years.
• Region: in which area is your employee not allowed to work for a competitor or start a business? This can be local, national or even international.
• Restrictions: what is your former employee not allowed to do? This could include working for a competitor, contacting the customers of your business, or using sensitive business information.
• Penalty clause: what happens if your employee violates the non-compete clause? You can set out a penalty or other measure in the document.

In the case of temporary contracts, a non-compete clause is only possible if there is a serious cause (zwaarwegend belang). You must then explain why protection of important information is necessary. This could include product innovations, special customers, or strategic market information.

Reasonable and clear

A non-compete clause must be reasonable and clear. This is to prevent confusion and abuse. It should also not be too strict; an employee mut stiil be able to find new work. A court may relax or invalidate a clause that is too strict. So, it is important that you think carefully about the agreements.

For example, the area to which the non-compete clause applies must be reasonable. If your business only operates in one province, you cannot prohibit an employee from working in the same industry throughout the Netherlands.

It is also important to determine for which positions a non-compete clause is necessary. Not every employee has access to all important company information. You can tailor a non-compete clause to each position or even to each employee.

Violation of the non-compete clause

Is a former employee not complying with the non-compete clause? Send them a letter informing them of the violation and asking them to comply with the agreements.

If that does not help, you can demand a penalty. Or you can go to court for preliminary relief proceedings (in Dutch). A judge can order your former employee to pay compensation.

Alternatives to a non-compete clause

Sometimes it is not necessary to agree on a non-compete clause. Another option is a relationship clause (relatiebeding). In this clause, you agree that your employee may not approach any of your business's customers or suppliers after leaving. Or a confidentiality clause. This protects confidential business information without affecting your employee's ability to find new work. You can also make tailor-made agreements. These are set out in an employment contract or a separate agreement. This can be done at the start of the employment relationship, but also later.

New rules on non-compete clauses

There are plans to amend the rules on non-compete clauses. This should provide better protection for employees. The proposed changes are:

• Duration: the non-compete clause may apply for a maximum of one year after departure.
• Area: you must clearly describe the region in which the clause applies.
• Explanation: employers must explain why a non-compete clause is necessary, even in the case of permanent contracts.
• Compensation: is your employee leaving and do you want them to abide by the clause? Then you must pay your employee compensation of at least 50% of their monthly salary for each month that the clause applies.

It is not yet known when the new rules will come into effect (in Dutch).