The Dutch government has proposed significant changes to the rules on non-compete clauses. The proposal follows concerns that non-compete clauses are often included as standard wording in employment contracts, even where there is no clear need for such a restriction.

What is expected to change?

Under the legislative proposal, the use and enforcement of non-compete clauses would become subject to stricter requirements:

• Non-compete clauses may be enforced for a maximum period of one year following termination of employment.

• Employers must specify the geographical scope of the restriction.
• Employers will be required to justify the necessity of the non-compete clause in all employment contracts, rather than only for fixed-term contracts.
• Employers seeking to enforce a non-compete clause must pay the employee financial compensation during the restricted period. The proposed compensation amounts to 50% of the employee’s last monthly salary for each month the restriction applies. For example, a six-month non-compete period would entitle the employee to compensation equal to three months’ salary.

These rules are generally also expected to apply to other restrictive covenants that limit the employee’s ability to work after termination of employment, such as certain relationship clauses and non-poaching clauses. The Dutch government has expressly indicated that a relationship clause prohibiting an employee from working for or with clients or business relations of the former...

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