Containment of non-compete agreement moves another step closer

What are the restrictions involved?

On March 4, 2024, the Bill to Modernize Non-Compete Agreements was submitted for Internet consultation. The intended changes are far-reaching. Broadly speaking, the Cabinet proposes to amend the non-compete clause as follows:

• The clause may only be agreed upon for a maximum of 12 months;
• The employer must clearly define the geographic scope;
• The employer is obliged to motivate why a non-competition clause is necessary (given the important business or service interests), even in employment contracts for an indefinite period of time. Currently, this obligation to state reasons only applies to fixed-term employment contracts;
• The employer informs the employee no later than one month before the end of the employment contract whether it wants to keep the employee bound by the non-competition clause, and for how long;
• The employer must pay the employee compensation for the time it wants to hold the employee to the non-competition clause. The compensation is 50% of the monthly salary for each month the employer invokes the clause;
• Employer and employee may deviate from the above rules in a settlement agreement, except for the maximum duration and duty to state reasons.

The above proposed changes also apply to non-solicitation clauses. Thus, if the bill is passed, it will also be more difficult for employers to hold their employees to a non-solicitation clause.

Additional limitation by motion?

The recently passed motion to add an additional restriction to the non-competition clause has not (yet) been included in the bill. It concerns the motion of February 8, 2024, in which it was adopted that no non-competition clause may be agreed upon if an employee earns less than 1.5 times modal salary in full-time employment (this is approximately €66,000 per year, or €5,000 per month). The minister has promised the House of Representatives to explore whether this restriction can also be added to the bill. She is expected to deliver her findings to the House of Representatives before the summer.

Comments can be made on internetconsultation.nl until April 15, 2024. Naturally, we will keep you informed of developments.