The Netherlands: Dutch employment Law Update

Breaking Dutch Employment News: The Legislative Proposal for the Modernization of the Non-Compete Clause has been published: The newly introduced draft legislation aimed at revising the non-compete clause indicates a substantial transformation in the existing laws in The Netherlands.

Key features of the legislative proposal include:

  • Limitation on Duration: Any non-compete agreement exceeding a duration of 12 months will be rendered null and void.
  • Specific Geographical Scope: The geographical area to which the non-compete applies must be precisely defined. This stipulation is already applicable to contracts of fixed duration. In the absence of a geographic scope, the non-compete will be considered null and void. The written rationale needs to illustrate the significant interests that necessitate the employer’s imposition of such a restriction. Precedent concerning fixed-duration contracts indicates that this criterion is not easily met.
    This is especially relevant today as globalization increases and individuals are more commonly working from various locations, enabling wider reach and the adoption of hybrid work models.
  • Obligatory Compensation: In the event that the employer enforces the non-compete, they are required to provide compensation equivalent to 50% of the employee’s monthly salary for the term of the restriction. This compensation must be paid in full and in advance. Similar requirements are observed in international contexts.
  • Notification Requirement: Employers must inform at least one month prior to the termination of employment whether they intend to enforce the agreement and for what duration.
  • Extension to Relationship Clauses: This new statute also extends to relationship clauses.

Although the ultimate scope of the legislative amendments is yet to be determined, it is evident that the conditions for the enforcement of a non-compete clause will tighten significantly. This may lead to a future where businesses can less dependent on non-compete clauses to secure their business interests. The potential shift of key figures, such as a VP of Sales, to a competitor could have substantial consequences.

To do:

  • Prioritize the safeguarding of crucial business information, trade secrets, and client relations.
  • Contemplate the integration of penalty clauses into employment contracts as an additional protective measure.
  • Begin the reevaluation of your current contracts and protection strategies promptly.

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For more in-depth information, consult the Explanatory Memorandum: