With the introduction of the Work and Security Act (WWZ) from 1 January 2015, the inclusion of a non-compete clause in an employment contract is permitted in indefinite contracts.

Exception

This main rule is subject to an exception which applies to all employment contracts concluded on or after 1 January 2015. A non-compete clause may be included in a fixed-term employment contract if the need for it is sufficiently justified. The justification must show that the non-compete clause is necessary because of compelling business or service interests. It can be seen from the words ‘necessary’ and ‘compelling business or service interests’ that this is a tough test. This is shown by a recent ruling of the sub-district court in Limburg dated 01-10-2018, ECLI:NL:RBLIM:2018:9246.

Case on non-compete clause in a fixed term employment contract

This case pertained to an employee who had joined the employer on 1 August 2017 on the basis of a one-year employment contract. The employment contract included a non-compete clause which prevented employees from working in any way in the employer’s field of work within 24 months of the end of the employment contract. According to the employer, the employee would have gained particular and company-specific knowledge, data and skills which could adversely affect the employer should they end up in the hands of competing companies.

The findings

The sub-district court firstly found that if a non-compete clause is included in a temporary employment contract, this must be properly justified. The sub-district court ruled that the obligation to give reasons had not been fulfilled in this case. For example, the employer did not sufficiently specify the compelling business interests and did not adequately explain the necessity of the non-compete clause. The sub-district court therefore ruled that the employee could not be held to the non-compete clause.

Conclusion

This ruling shows the importance of a well-reasoned non-compete clause. The requirements for this are very strict. A general justification like “the employee has relevant knowledge and sensitive company information” is therefore insufficient. The non-compete clause must be further specified and developed in order to lead to the conclusion that this is necessary for the employer.

Advice

When drawing up a non-compete clause in a fixed-term employment contract, employers should indicate in specific terms why this is needed and which compelling business or service interests are served by it.

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