A non-competition clause in a fixed-term contract is only allowed if the employer has substantial business interests in doing so and justifies these in the contract. Frequently, employers insert a non-compete clause with a broad justification in all contracts. This is what happened in a recent case before the District Court of Amsterdam. The judge suspends the non-compete clause as the employer has used exactly the same justification for every employee, from HR to sales staff. Read in this blog how the judge reaches this decision and what lessons can be learned for practice.
In principle, it is not allowed to include a non-competition and non-solicitation clause in a fixed-term employment contract, unless the employer has substantial business interests in doing so and explicitly motivates this in the contract. The legislative history shows that the intention of the legislator is for employers to make a specific consideration in each individual case about the inclusion of a non-competition and relationship clause and clearly motivate why this clause is necessary for the employee concerned.
What does this case involve?
In the case before the Amsterdam District Court, both the non-competition and the relationship clause have been suspended. This is because the employer indiscriminately applied the same justification to all employees, from HR personnel to sales staff. According to the court, this lack of specificity does not meet the standard in the legislative history, which emphasizes the need for specific consideration for each employee. It is crucial for employers to understand that non-compete agreements are primarily meant to protect sensitive business information, not to bind employees to the company.
Conclusion
Although this ruling was a summary proceeding and may be followed up, be warned that as an employer, it is essential to ensure that the justification for the non-competition clause is directly related to the unique knowledge and skills the employee gains within their position. Failure to specify this can lead to the invalidation of the non-competition or non-solicitation clause in potential legal proceedings.
Using the same justification for the non-competition clause in all agreements increases the risk of suspension or annulment by the courts. To avoid this, it is important to also consider whether it is necessary to agree on a non-competition clause for each position.
Source: Subdistrict court Amsterdam, December 23, 2023, AR-Updates 2024-021.