Last week, Minister of Social Affairs Van Gennip sent a letter to the Dutch House of Representatives detailing her plans to reform the statutory framework for non-competition clauses in employment agreements.

The minister is preparing a bill that would make the following changes:

• The duration of non-competition clauses will be capped
• Non-competition clauses must include, specify and explain the geographical scope of the clause
• Employers will have to explain which compelling business interests (zwaarwichtig bedrijfsbelang) justify the inclusion of a non-competition clause in a permanent employment agreement, an obligation that already exists for fixed-term employment agreements
• When invoking a non-competition clause, the employer will in principle have to pay compensation based on a percentage of the employee's last salary.

The minister has dropped two policy options she had previously suggested because they did not sufficiently protect the interests of employers: the option that the non-competition clause could only be invoked if the termination was at the employee's initiative, and that the non-competition clause would lapse if the agreement was terminated during the trial period.

The question of whether a non-competition clause should lapse in the event of a bankruptcy is also under consideration. In such cases, there may be compelling business reasons for maintaining an employee's non-competition obligations. This is especially the case where the bankrupt employer may be sold as a "going concern", with the buyer continuing the business. In such cases, it should remain possible to invoke a non-competition clause.

The bill is intended to prevent that non-competition clauses are included as a standard clause in employment agreements, which is what many employers currently do. The bill is expected to be published for internet consultation by the end of this year.

If you would like to discuss with us how these changes may impact your business, please contact our Employment and Employee Benefits group.