On May 21, 2024, the Subdistrict Court of Rotterdam (Location Rotterdam) issued a significant judgment regarding a non-compete clause in the case between an employee and Verwater Group B.V. (Verwater). This ruling (ECLI:NL:RBROT:2024:4786) highlights crucial aspects of non-compete clauses in employment contracts and their enforceability.
What happened?
The employee commenced employment as a project manager at Verwater on May 20, 2019, under a fixed-term contract. Article 14 of his employment contract stipulated that a non-compete clause would apply once the employment contract was converted to an indefinite term. On May 25, 2020, the employment contract was converted to an indefinite term via an addendum, which explicitly notified the employee of the applicable clauses, including the non-compete clause.
On April 1, 2024, the employee joined X, a direct competitor of Verwater. Verwater claimed that the non-compete clause had been breached and demanded that the employee cease his activities at X.
What was the judgment of the Subdistrict Court?
The Subdistrict Court found it sufficiently likely that a final ruling would determine a legally valid non-compete clause had been established, with the following considerations:
- Conditional Clause: The court determined that the non-compete clause only came into effect upon the conversion to an indefinite term contract. It was a conditional clause, which became relevant only upon the extension of the employment contract.
- Written Requirement: By signing the addendum on May 25, 2020, which confirmed the indefinite term contract and referred to the previously agreed terms, including the non-compete clause, the written requirement was fulfilled.
- Employee Awareness: The employee’s defense that he was unaware of the implications of the non-compete clause was not accepted. The court ruled that the employee should have reviewed the addendum’s contents before agreeing to it.
- Protection of Business Information: Verwater convincingly argued that, due to his managerial role, the employee had access to specific and confidential business information. The employee could use this knowledge at X, constituting a breach of the non-compete clause.
The Subdistrict Court concluded that the employee was bound by the non-compete clause. There was sufficient ground to grant Verwater’s claim. The Subdistrict Court found it likely that the employee would be ordered to pay a penalty in final proceedings and therefore awarded an advance payment of €75,000.
What is the key takeaway?
This judgment underscores the importance of clear agreements regarding non-compete clauses in employment contracts and awareness of the consequences upon conversion to an indefinite term contract. Employees should thoroughly inform themselves about such clauses, and employers must use legally sound language to protect their business interests.
