Insights

Attention: update on the legislative proposal for non-compete clauses

Earlier, we informed you about plans to modify the legislation concerning the non-compete clause (see our previous article from June 9, 2023). The next step in the legislative process has now been reached: last Friday (March 1, 2024), the Council of Ministers approved the Draft Law Modernizing the Non-Compete Clause. This document is currently open for an online public consultation, and feedback can be provided for the next six weeks (see here).

 

Purpose and content of the legislative proposal

The legislative proposal aims to:

  • Reduce the use of the non-compete clause to promote free choice of employment, labor mobility, and optimal labor allocation.
  • Provide more legal certainty, ensuring clear rights and obligations for both employers and employees in advance.
  • Preserve the ability for employers to protect their business interests.

 

The key intended changes from the legislative proposal include:

  • Limiting the duration of the non-compete clause to a maximum of one year after the termination of the employment contract.
  • Requiring written justification for the following elements of the non-compete clause:
    • Geographic scope.
    • Substantial business or service interest for all employment contracts (currently applicable only to temporary contracts and thus will apply to all employment contracts).
  • Mandating employers to pay compensation to the employee when invoking the non-compete clause, with the amount set at 50% of the last monthly salary for each month the employee is bound by the non-compete clause. This compensation must be paid by the employer on the last day of the employment contract, meaning the duration of the employee’s obligation to comply with the clause must be clear in advance.
  • Requiring employers to invoke the clause in a timely manner and in writing, with the guideline being at least one month before the end of the employment contract.

It has also been clarified that the above rules apply to non-solicitation / client clauses (and under certain circumstances, anti-poaching clauses).

If this legislative proposal is accepted by the Parliament and the Senate, transitional provisions will apply. ‘Old’ non-compete clauses will remain valid after the enactment of this new law, but employers will be immediately obligated to pay compensation when invoking the clause.

In summary, significant changes are on the horizon, and we will keep you informed. If you have any questions or need further information, feel free to contact us at info@bd-advocaten.nl. We are happy to assist you!

Aimée Peterse

Published On: 7 March 2024

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