The government proposed new regulations regarding non-compete clause in Dutch employment contract. Most likely these proposed regulations will become new law in 2025. In that case, the employer must pay compensation to the former employee with whom a non-compete clause is agreed. This shall affect both new and already existing employment contracts and non-compete clauses.
Based on the proposed new regulations, the following requirements shall apply cumulatively for both fixed and indefinite employment contracts.
· The non-compete clause should be in writing.
· The employee must be at least 18 years of age.
· The maximum duration of the non-compete clause is 12 months.
· Description and justification of the geographical scope (whether the clause applies within a certain radius around the company, within a region, or within Europe, for example).
· Justification of the significant business interest that the employer has in including and enforcing the non-compete clause.
If the non-compete clause does not include all the above requirements, the clause will be regarded invalid and shall not be considered applicable.
During the duration of the non-compete clause, the employer must pay an amount which is 50% of the monthly salary, including the applicable compensation benefits. This compensation must be paid upfront to the employee for the entire duration of the non-compete clause. Payment should be made via the payroll after deduction of the mandatory income tax and social security contributions.
Considering the above, an employer has the following choices:
1. Concluding an employment contract without a non-compete clause.
2. Concluding an employment contract with the non-compete clause and enforce this clause on the employee and pay the employee compensation during the duration of the clause.
3. Concluding an employment contract with the non-compete clause and NOT enforcing this on the employee at the end of the contract. In this case, there is no need to pay compensation for the non-compete clause.
Depending on how the employment contract is terminated, the employer must inform the employee within a month before the end or within 14 days after the end date. (up to 12 months).
If the employee believes that this non-compete clause is not valid or unfairly disadvantages, the employee can go to court and request the non-compete clause to be annulled or limited. If the employee succeeds in court and (part of) the non-compete clause becomes invalid, the employee must repay the non-compete compensation received from the former employer.
