Competition clause reform: end of an era?

20 June 2023

Recently, our Minister of Social Affairs and Employment announced in a letter to the House of Representatives that preparations will start on a legislative proposal to modernize the non-competition clause. Research has shown that non-competition clauses in the Netherlands are so often agreed upon that it can lead to unjustified restrictions on employees. This affects the proper functioning of the Dutch labour market, as employees may be restricted by non-competition clauses preventing them from changing jobs within their expertise and specialism. The reform of the non-compete clause should prevent its unnecessary use so that labour mobility is not unnecessarily inhibited. The reforms involve the following:

  • non-competition clauses will be legally limited in duration;
  • a non-competition clause must include a geographical scope, which must be specified and justified;
  • when entering into non-competition clauses, employers will also have to justify the ‘substantial business interest’ in employment contracts for an indefinite period of time; and
  • when the non-competition clause is invoked, employers will in principle have to pay compensation, set at a percentage of the employee’s last-earned salary determined by statutory provision.

The Minister has indicated that she expects to offer the legislative proposal for internet consultation by the end of 2023.

Author: Annemarth Hiebendaal