Breaking Free from Non-Competition Clauses in The Netherlands

In the Netherlands, jobs are up for grabs in many sectors. Good news for employees with sought-after positions, such as delivery drivers, customer service employees, HR specialists, IT professionals, security guards, installers, and mechanics. They have a strong negotiating position and can easily switch to the competition where the grass is greener.

An employer is committed to retaining these people. This can be done with the carrot and the stick: they can offer interesting employment conditions in the hope that employees will stay. Some employers even provide paid childcare. Many employers choose the stick and include a non-competition clause in the contract, either in the (lighter) form of a non-solicitation clause or a combination of both. Anti-poaching clauses are also popular. If you have such a clause in your contract and are considering switching to another employer, it is good that you are aware of what the Dutch Supreme Court ruled on this last year. The non-competition clause serves a specific purpose and cannot be used at will to retain staff.

The ruling is extremely important for expats because I have noticed that they are often bound by a non-competition clause – or a variant thereof – and that clause is drafted so that it is (no longer) legally valid.

The Verdict

This case concerned an international truck driver with a non-competition and non-solicitation clause in his employment contract. A fine was imposed for violation, as is often the case. However, on March 1, 2020, the driver started working for a competitor. The employer demanded in summary proceedings that the employee immediately cease work for this competitor and pay the agreed fines. The subdistrict court judge granted the claims and ruled that the employer’s interests outweighed those of the driver. According to the subdistrict court judge, this interest lies mainly in guaranteeing the continuity of business operations (“If qualified employees transfer, continuity is jeopardized because the labor market is tight”). Therefore, the subdistrict court judge ruled that a tight labor market is a valid reason to bind an employee to a non-competition clause.

The court of appeal overturned that ruling. A non-competition clause is intended to protect the employer’s business operations. This concerns the acquired know-how and goodwill. The clause is not intended to bind employees to the company. An employer cannot simply want to retain the employee’s “knowledge and experience” with a non-competition clause. The fact that an employee learns and takes that knowledge with him is inherent to his departure, just as the new employer benefits from this. Only if the employee, through his position, is aware of essential relevant (commercial and technical) information or of unique work processes and strategies and can use this knowledge at his new employer, giving that employer a competitive advantage, can he protect that knowledge with a non-competition clause. Another example is when the employee works so intensively with certain customers of the old employer that these customers switch to the new employer. This can also be limited by a (non-solicitation) clause.

The Supreme Court upheld that judgment: in the weighing of interests between employer and employee, “the employer’s interest in retaining an employee for a certain period plays no role, even if the employer needs time to adapt to a tight labor market and find replacement staff.”

Now What?

What does this verdict mean for expats? Of course, prevention is the best cure. Take the time to read your employment contract carefully in advance and, if necessary, ask a legal advisor to analyze it. If you have signed your contract and wish to leave the company, the non-competition clause is often used by the employer as a bargaining chip in negotiations about your departure. Therefore, it is good to know that such a clause can be used to protect trade secrets or to retain specific customers with whom you have (had) contact but not to retain you in the company or to prohibit you from communicating with anyone with whom the company has had dealings with. I see the latter in particular in many non-competition clauses: the employee is not allowed to maintain contact in any way with suppliers, customers, etc., even if he has had little or no contact with these people. Such agreements go too far. If you encounter this and are unsure about a successful outcome, please get in touch with Flott.

On November 14 (7.00 -8.30 PM), I will discuss these and other matters live for Expat Republic. Admission is free. Keep an eye out on the ER website or LinkedIn. Don’t miss it!

For more information, please contact Ronald M. Beltzer, Attorney – Employment law specialist, at Flott Advocatuur.