The Dutch regulations that govern non-compete clauses are employer friendly. There are no conditions for validity, other than that the clause must be completed in writing with an employee of age. The court can only annul the clause retrospectively (in whole or in part) if the employee is unfairly disadvantaged by that clause relative to the employer’s interest in maintaining it. There is also no obligation for the employer to pay the employee compensation if the employer maintains the clause. The court can award such compensation retrospectively, but this rarely happens.

As there are few, if any, disadvantages for employers in the Netherlands to include non-compete clauses in employment contracts, many employment contracts in the Netherlands include such clauses. According to recent research, as many as 3.1 million employees out of a workforce of 9.7 million are bound by non-compete clauses.

Logically, many employees are therefore bound by a non-compete clause without them representing a threat to their former employer if they were to join a competitor. As a result, in many cases, a practical solution is agreed between employee and employer on a waiver of the non-compete clause at the end of an employment contract. However, not every solution is equally safe for employers.

In a recent decision of the Court of Appeal of Arnhem-Leeuwarden, it weighed heavily against the employer that, in discussions with the employee about a possible waiver of the non-compete clause, he had suggested that the employee could buy off the clause. By doing so, the employer showed that he apparently did not fear that the employee could cause him serious damage by working for a competitor, but that he wanted to make some financial gain from the clause. The employee’s appeal to be relieved from the clause was therefore awarded by the Court.

This ruling shows that, although there are very little rules around non-competition clauses in the Netherlands, an employer’s interest in enforcing such clauses may only lie in protecting the company’s accrued business and goodwill. Infringement of this accrued business and goodwill may occur if an employee has such strong customer relationships that there is a high probability that customers will (want to) go with the employee. Or, if the employee possesses knowledge of key commercial information and strategies and/or technical know-how, that the competitor could be unfairly advantaged if that information and/or know-how would end up there. By making an offer – or even including it already in the clause – that the non-competition clause can be bought off for a certain amount, the employer runs the risk that a court will find in it a clear indication that the employer is not concerned with protecting its accrued business and goodwill.

This article was written for Lexology’s International Law Office newsletter.