Competition and non-solicitation clauses: when is it really valid?
A non-competition or non-solicitation clause can have major consequences for both employers and employees. Employers want to protect their business interests, while employees are often limited in their freedom to accept a new job. But when is a non-competition or non-solicitation clause actually valid? And what can you do if you don't agree? The employment law lawyers at Arslan Advocaten explain what the rules are, how the judge looks at a clause and what you can do in the event of a conflict.What is a non-competition clause?
A competition clause prohibits an employee from working for a competitor or starting his own competing company after the end of the employment contract. The intention is to prevent business-sensitive information, customers or know-how from reaching competitors. A clause like this is often combined with other provisions, such as a summary dismissal clause or confidentiality clause, so that the employer has extra security.Legal basis
The legal basis for the non-competition clause can be found in Article 7:653 of the Civil Code. This states, among other things, that a non-competition clause is only valid if it has been in writing with an employee who is of age. A non-competition clause may only be included in a temporary contract if there is a compelling business interest, which must be justified in writing.When is a non-competition clause valid?
Not every non-competition clause is automatically valid. The judge can annul the clause in whole or in part if it is unreasonable or does not meet the legal requirements. Below are the most important conditions.1. Agreed in writing
The clause must be recorded in writing, for example in the employment contract itself or in a signed appendix. Verbal agreements are not valid. This is often combined with a settlement agreement upon termination of employment.2. Only for adult employees
An employee must be at least 18 years old at the time he or she signs the clause. A non-competition clause with a minor is void.3. For temporary contracts: compelling interest required
In a fixed-term employment contract, a non-competition clause is only permitted if the employer can demonstrate that there is a compelling business interest. For example, because the employee has access to confidential company information. Without a clear motivation, the clause is void.How does this work in practice?
Suppose two employees, one of whom has a temporary contract, resign and start a competing company together. The employer relies on the non-competition and non-solicitation clause. Whether this is allowed depends on the content and motivation of those clauses. The judge checks whether the clause is properly substantiated. For example: if the employee has full insight into the working method, knows the financial position of the company, and has a lot of contact with customers, an employer can demonstrate that a clause is necessary to protect the competitive position. In sectors where the market is small and relationships are crucial, the importance can weigh extra heavily. In a recent case, the judge ruled that the non-competition and non-solicitation clauses were valid because:- The employees competed directly by becoming active in the same market.
- They had access to sensitive information and relationships of the old company.
- They were core personnel and had been trained by the employer.
4. Reasonable duration and geographical limitation
A non-competition clause must be reasonable in duration and scope. Often a period of 6 to 12 months and a defined geographical area applies (for example 'Netherlands' or 'Randstad'). A restriction that is too broad can be moderated by the court.5. Weighing of interests by the judge
If an employee states that the clause unreasonably hinders him from finding a new job, the court can annul or limit the clause. The judge weighs the interests of the employer (protection of knowledge and customers) against the interests of the employee (freedom of choice of employment). In some cases this may lead to a transition compensation or additional compensation.What is a non-solicitation clause?
A solicitation clause prohibits an employee from maintaining contact with (former) customers or relations of the employer after the end of the employment relationship. This clause also falls under Article 7:653 of the Dutch Civil Code and is assessed by the court in the same way as a non-competition clause.Examples of a non-solicitation clause
- The employee is prohibited from approaching business relations of the employer within 12 months after the end of the employment contract.
- The employee may not accept orders from customers who have been customers of the employer in the last 2 years.
Annulment or mitigation by the court
An employee who is restricted by a non-competition or relationship clause can request the court to annul the clause in whole or in part. The judge looks at factors such as:- the position and position of the employee;
- the duration and scope of the clause;
- the nature of the new position;
- the financial consequences for both parties.