03 June 2024

Legislative proposal to regulate non-compete clauses

In March 2024, Minister Van Gennep published the announced legislative proposal Modernisation of the Competition Clause. The consultation phase ended in May 2024. The Minister is aiming for 1 July 2025 as the enforcement date. The main principles of the proposal are currently as follows: 

  1. The maximum duration of the non-competition clause may not exceed 12 months after the end of the contract and its duration must be justified; 
  2. A geographical limitation in the clause is mandatory; without it, the clause is null and void; 
  3. The condition that substantial business interest  must be motivated will extend to every contract, whether definite or indefinite, or the clause is null and void; 
  4. The employer must invoke the clause in writing no later than one month before the end of the employment contract, else it lapses, except in case  the employee resigns or the employment agreement is terminated by the court; 
  5. The employer must pay 50% of the last-earned monthly salary for each month that the non-competition clause is enforced after the end of the employment contract, unless the employee is found guilty of serious misconduct.  
  6. If an employer invokes the clause but fails to pay the compensation, the clause lapses, but the obligation to pay the compensation remains; 
  7. The court  may mitigate the clause, without lapse of the obligation to pay the compensation; 
  8. The employee has to repay the compensation in two cases: if the court annuls the non-compete altogether or if the employee  violates the clause despite the clause being invoked by the employer and the compensation has been paid; 
  9. In a settlement agreement, parties may agree that the clause will remain in effect without payment of the compensation; 
  10. Existing non-competition clauses remain valid without the obligation to motivate the clause or maintain a geographical limitation, but with a maximum duration of one year and one month’s written notice; 
  11. The House of Representatives has recently taken receipt of a motion that would restrict the use of a non-competition clause to employees earning at least one and a half times the average salary. 

The final legislation may, of course, differ from these proposals. If the proposal becomes law, the invocation of non-compete clauses will probably decline. At the same time, employers would likely keep a closer eye on violations of non-competes (since they could recover the paid compensation in that way). On the employee side, given the compensation, litigation to have a non-competition clause nullified might also decline. 

How can La Gro be of assistance? 

Would you like to know more about non-compete clauses? Is a former employee violating his non–compete? Do you have a different question? Expertise in 18 legal fields enables La Gro to offer broad legal assistance. Feel free to contact me or one of my specialist colleagues .    

Author
G.B.M. (Gerard) Zuidgeest

Attorney at Law & Partner

Call: +31 172 530 250