Surely a non-competition clause of this kind cannot be allowed to stand?

Published by: Bernard Bongaards posted on 28 April 2017 reading time

At get-togethers and birthdays, you often hear the great misconception that a non-competition clause in an employment contract is a paper tiger. A big misconception!

With the introduction of the Act on Work and Security, the basic principle is that a non-competition clause can no longer be agreed in fixed-term employment contracts unless there is a compelling interest. Practice with respect to non-competition clauses in employment contracts of indefinite duration has remained virtually unchanged. This means that an employee who has a non-competition clause in his or her employment contract should certainly not take the gamble of transferring to a competitor lightly. This can have far-reaching consequences, including sky-high penalties payable to the ex-employer.

On the other hand, strict conditions remain attached to the use of a non-compete clause in the employment contract. In a recent judgment of the Supreme Court (3 March 2017), clarification was given on two aspects.

Relationship clause is competition clause

Although there was little doubt about this in the legal literature, the Supreme Court confirmed in its judgment that 'a clause between employer and employee which limits the latter's authority to work in a certain capacity after the end of the employment contract' is the norm. This means that not only a non-competition clause is covered, but also, for example, the much-used non-solicitation clause. In short, a clause which does not so much prohibit the employee from joining a competitor, but which does prohibit the employee from approaching 'old' contacts from the new working environment. Such a non-solicitation clause must therefore also meet strict requirements. One of the strict requirements is that it must be in writing.

Scripture requirement

If you, as an entrepreneur, want to stay on the right side of the line, you should seal every somewhat important change in the employment contract with your employee again with a signature of both parties and the non-competition clause should again be included in that amended contract. In practice, of course, this does not always happen. The Supreme Court has recognised that the written requirement may also be met if the non-competition clause is included in a set of employment conditions attached to the signed employment contract, or if the employee in any event explicitly states in the signed document that he agrees to a non-competition or non-solicitation clause. Lower courts have already accepted that the written requirement can be met, for example, by explicit consent via e-mail. A problem here may be that - more so than with a signature in writing - the authenticity of an e-mail and/or the origin of the employee concerned may be disputed.

The main argument for this written requirement is that it must be ensured in the process that the employee has taken note of the non-competition clause and has considered its possible consequences. There is therefore a risk from the perspective of the entrepreneur that subtly hiding a non-competition clause in many pages of contract or staff regulations may make it a little easier to obtain an employee's signature at the outset, but at the same time it may make the difference between legally valid agreement and non-agreement in the event of a subsequent discussion.