Non-compete and non-solicitation clause: when is it really valid?

A non-compete clause or non-solicitation clause can have major consequences for both employers and employees. Employers want to protect their business interests, while employees are often limited in their freedom to accept a new job. But when is a non-compete clause or non-solicitation clause actually valid? And what can you do if you disagree with it?

The employment lawyers at Arslan Advocaten explain what the rules are, how the court views a clause, and what you can do in case of a dispute.

What is a non-compete clause?

A non-compete clause prohibits an employee from going to work for a competitor after the end of the employment contract or from starting their own competing business. The aim is to prevent business-sensitive information, customers, or know-how from ending up with a competitor.

A clause like this is often combined with other provisions, such as a summary dismissal-clause or confidentiality clause, so that the employer has extra assurance.

Legal basis

The legal basis for the non-compete clause can be found in Article 7:653 of the Civil Code. Among other things, it states that a non-compete clause is only valid if it has been agreed in writing with an employee who of legal age is. In a temporary contract a non-compete clause may only be included if there is a compelling business interest which must be substantiated in writing.

When is a non-compete clause valid?

Not every non-compete clause is automatically valid. A judge can annul the clause in whole or in part if it is unreasonable or does not meet the legal requirements. Below are the main conditions.

1. Agreed in writing

The clause must be laid down in writing, for example in the employment contract itself or in a signed appendix. Oral agreements are not valid. This is often combined with a settlement agreement at the end of employment.

2. Only for employees of legal age

An employee must be at least 18 years old at the moment he or she signs the clause. A non-compete clause with a minor is void.

3. For fixed-term contracts: compelling interest required

In a fixed-term employment contract, a non-compete clause is only permitted if the employer can demonstrate that there is a compelling business interest exists. For example, because the employee has access to confidential business information. Without a clear justification, the clause is void.

4. Reasonable duration and geographic restriction

A non-compete clause must be reasonable in duration and scope. Often, a period of 6 to 12 months and a defined geographic area applies (for example, ‘the Netherlands’ or ‘the Randstad’). An overly broad restriction can be mitigated by the court.

5. Balancing of interests by the court

If an employee argues that the clause unreasonably hinders him or her from finding a new job, the court can annul or limit the clause. In doing so, the court weighs the employer’s interest (protection of knowledge and customers) against the employee’s interest (freedom of choice of employment). In some cases, this can lead to a transition payment or additional damages.

What is a non-solicitation clause?

A non-solicitation clause prohibits an employee from maintaining contact with (former) customers or business relations of the employer after the end of the employment. This clause also falls under Article 7:653 of the Dutch Civil Code and is assessed by the court in the same way as a non-compete clause.

Examples of a non-solicitation clause

• The employee is prohibited from contacting the employer’s business relations within 12 months after the end of the employment agreement.
• The employee may not accept assignments from clients who have been clients of the employer in the past 2 years.

A non-solicitation clause can therefore also be unreasonable if it is drafted too broadly or if it is no longer necessary to protect the employer’s interests.

Annulment or mitigation by the court

An employee who is restricted by a non-compete or non-solicitation clause may ask the court to annul the clause in whole or in part. The court considers factors such as:

• the employee’s role and position;
• the duration and scope of the clause;
• the nature of the new role;
• the financial consequences for both parties.

In some cases, the court may decide that the clause still applies, but that the employer must pay the employee compensation . That loss can sometimes fall under wage loss or loss of income are classified.

What can you do in a dispute about a non-compete clause?

Whether you are an employer or an employee: in a dispute over a non-compete clause it is wise to seek legal advice quickly. A lawyer can often help to have the clause mitigated, suspended, or enforced.

For employees

Always have the clause reviewed before you move to a new job. A violation can lead to substantial fines. A lawyer can also negotiate with your (former) employer about exemption from or buyout of the clause.

For employers

If you wish to enforce a non-compete clause, make sure you have solid evidence of damage or business interests. It is also important that the clause is not drafted too broadly or too generally. Our employment law specialists can help draft legally watertight clauses.

Arslan Advocaten helps with non-compete clauses

The employment law specialists at Arslan Advocaten have extensive experience with disputes concerning non-compete and non-solicitation clauses. We advise both employees and employers on the validity, interpretation, and enforcement of these clauses. We also assist clients in proceedings before the subdistrict court.

Frequently asked questions about non-compete and non-solicitation clauses

Can a non-compete clause simply be annulled?

Yes, if the court finds that the clause is unreasonable or does not meet the legal requirements, it can be annulled in whole or in part.

May an employer include a non-compete clause in a fixed-term contract?

Only if there is a compelling business interest that is substantiated in writing. Without such justification, the clause is void.

What is the difference between a non-compete clause and a non-solicitation clause?

A non-compete clause restricts the employee from working for competitors, while a non-solicitation clause prohibits contacting the employer’s (former) clients.

What happens if I breach the clause?

The employer can demand a contractual penalty or seek an injunction through the courts. Always seek legal advice before switching jobs.

Contact Arslan Advocaten

Do you have a dispute about a non-compete clause or want to know whether your clause is valid? Get in touch with Arslan Advocaten for immediate legal advice. Our experienced employment lawyers support both employers and employees and provide a practical and strategic approach.