On 4 March 2024, Minister van Gennip of Social Affairs and Employment published a Bill to reform the non-competition clause for internet consultation. In our previous Information letter, we already informed you that the Minister wants to tighten the rules on the non-competition clause. The non-competition clause is often included as a standard clause in employment contracts, leaving a large group of employees bound by a non-competition clause when they are not dealing with customers, relations or business-sensitive information. The government believes that the non-competition clause is used too widely and too often incorrectly where the interests between employer and employee are not balanced. According to the government, many employees are restricted in their choice of employment. And employers are less able to find new staff due to the broad use of the non-competition clause. Labour mobility is restricted too much. These are the main proposed changes: Translated with DeepL.com (free version)
- Every non-competition clause (in employment contracts for a definite or indefinite period of time) must state the reasons why it is necessary because of important business or service interests. Without justification, the non-competition clause is null and void.
- A non-competition clause with a duration longer than 12 months is null and void.
- The geographical scope (think of an area or radius) should be included in the non-competition clause.
- No later than one month before the end of the employment contract, the employer shall inform the employee in writing whether it will keep the non-competition clause and for what period. In case of termination (Dutch: "opzegging") by the employer, the employer shall inform the employee no later than at the time of termination.
- The employer who holds an employee to the non-competition clause must pay compensation equal to 50% of the last monthly salary for each month the employee is held to the clause. That compensation must be paid to employee no later than the last date of employment. If the employer fails to pay on time then the non-competition clause no longer has effect. But the compensation will still be due.
All this also applies to relationship clauses. Employer and employee can make different arrangements in a settlement agreement. The maximum duration of the clause and the obligation to state reasons cannot be deviated from. According to the bill, the new rules will enter into force on 1 January 2025. Non-competition clauses agreed before the entry into force of the bill will remain valid. The bill's new formal requirements (stating the period for which the non-competition clause applies, geographical scope and justification in case of employment contracts for an indefinite period of time) do not apply to existing non-competition clauses.
However, after the bill comes into force, existing non-competition clauses may be subject to the new rules on invoking the non-competition clause and payment of compensation.
On 13 February 2024, the House of Representatives adopted a motion setting a minimum income for a valid non-competition clause. This concerns a minimum income of one and a half times the modal salary (EUR 66,000 gross) assuming full-time employment.
The minister has indicated that she will still examine whether this restriction can also be added to the bill.