Surveys show that one in three employers uses a non-competition clause in the employment contract. Usually as a standard clause. The clause prohibits the employee from performing similar work at another company or as an entrepreneur after the end of the contract. Here, the employer's aim is to protect its business interests such as trade secrets and business relations. However, often the employee does not have access to such trade secrets at all. It has also emerged that many employers use the non-competition clause to retain scarce staff for which the non-competition clause is not intended. In a letter dated 2 June 2023 to the House of Representatives, Minister van Gennip announced her intention to reform the non-competition clause. The Minister wants to prevent the unnecessary use of the non-competition clause so that labour mobility is not unnecessarily inhibited. The Minister wants to work out the following changes in a bill:
- limit the competition clause in duration.
- when agreeing a non-competition clause, the geographical scope must be included, specified and justified.
- the employer must justify the overriding business interest of a non-competition clause in open-ended contracts (this already applies to temporary contracts).
- if the employer invokes the non-competition clause then it must pay the employee compensation. That compensation amounts to a certain percentage of the last-earned salary.
A motion was passed in the House of Representatives on 13 February 2024 asking the government to include in the reform plans that a non-competition clause is null and void if it is agreed with an employee earning less than one and a half times modal salary (periodic salary + holiday allowance + fixed benefits) in full-time employment.
If this bill is actually submitted and passed by the Senate and House of Representatives, employers will be able to validly enter into non-competition agreements in fewer cases. We will keep you updated on further developments.