Non-competition clause in a fixed-term employment contract?
31 March 2021
Since the Work and Security Act entered into force, the main rule is that a non-competition clause in a fixed-term employment contract is, in principle, not permitted. An exception to the main rule is possible if the employer can motivate that the non-competition clause is necessary due to 'important business or service interests'. In this blog we discuss the validity of a non-competition clause in a fixed-term employment contract.
The non-competition clause
A non-competition clause restricts the employee from working in a certain way after the end of the contract. The clause is valid if:
- Agreed upon in an employment contract for an indefinite period;
- Agreed upon in writing;
- Agreed upon with an employee who has reached the age of majority.
Therefore, it is not possible to include a non-competition clause in a fixed-term employment contract. Employees with a fixed-term employment contract would otherwise suffer a 'double disadvantage'. They have a fixed-term contract and the non-competition clause will prevent them from moving on to a new job.
Important business or service interests
There is one exception to the main rule. If the employer can motivate in writing that the clause is necessary because of ‘important business or service interests’, a non-competition clause can be agreed in a fixed-term employment contract.
Important business or service interests are, for example, the specific knowledge or business information that the employee will acquire during his or her employment, whereby the employer would be disproportionately disadvantaged if the employee enters the service of a competing company. The interests must exist not only at the time the non-competition clause is agreed upon, but also at the time the employer invokes the clause.
The motivation for the non-competition clause must be specified to the position and/or the work of the employee concerned. This may be 1) included in the clause itself, 2) attached to the clause or 3) included in a separate document which is drafted and signed by both parties at the same time as the clause. The motivation for the non-competition clause cannot be provided at a later date. Without a motivation, a non-competition clause in a fixed-term employment contract will be null and void.
Agreeing to a new non-competition clause
In the following cases it is, in any case, wise to agree on a new non-competition clause in writing:
- If a new employment contract is entered into, whether this is an extension of an existing contract or a conversion of a fixed-term employment contract to an indefinite term;
- If different employment conditions are agreed upon in the new employment contract or if the employee is going to perform a different function. In that case, there is a risk that the non-competition clause will become more oppressive (in Dutch: zwaarder gaat drukken), as a result of which the non-competition clause relating to the old situation will lose its validity;
- In the event of a transfer of undertaking or a transfer to another employer.
Do you have any questions about the non-competition clause? Please contact one of our lawyers.