Does your employment contract contain a non-compete clause, and have you been presented with a settlement agreement? If so, it is important not to simply let that clause stand. A non-compete clause can significantly restrict your freedom in the labour market, but the good news is that in many cases there is considerable room to negotiate. Particularly when you are leaving anyway, there is often more flexibility than you might expect.
What is a non-compete clause and when does it apply
A non-compete clause stipulates that after the end of your employment you may not simply take up a position with a competing employer, or start your own business in the same sector. The clause applies for a set period and often also has a geographical scope.
Legally, the non-compete clause is governed by Article 7:653 of the Dutch Civil Code. The law sets out clear conditions: the clause must have been agreed in writing with an employee who is of legal age. For an open-ended employment contract, that is the basic rule. For a fixed-term contract the bar is higher: the employer must then provide a written justification demonstrating that there is a compelling business or service interest. If that justification is absent, the clause is in principle invalid.
Furthermore, Article 7:653(4) of the Dutch Civil Code provides that the employer cannot derive any rights from the non-compete clause if the termination of the employment contract is the result of seriously culpable conduct on the part of the employer. Examples include bullying, discrimination, or systematic breach of the duty of care.
What can happen to your non-compete clause in a settlement agreement
In a settlement agreement, you and your employer jointly make arrangements regarding the termination of your employment. This also provides the opportunity to have the non-compete clause explicitly lapse. If you agree on this, it is recorded in the agreement itself — and you are entirely free of it.
However, there are two pitfalls to watch out for:
- Full and final settlement: Almost every settlement agreement contains a full and final settlement clause. If the agreement makes no mention of the non-compete clause, uncertainty may arise as to whether the clause lapses by virtue of that settlement or continues to apply. If you want certainty, ensure that the settlement agreement explicitly states that the non-compete clause lapses.
- New clause in the settlement agreement: Some employers attempt to reintroduce a non-compete clause that was already invalid by including it in the settlement agreement. If you sign this without objection, a court may rule that you have agreed to the clause afresh — even if it was invalid beforehand.
Never be caught out by the small print, and always review the settlement agreement carefully before signing. For more information about what a sound agreement should contain, visit the Settlement Agreement page.
Negotiating over the non-compete clause
In practice, employers are regularly willing to cooperate in removing or limiting the non-compete clause. They want your signature on the settlement agreement, and that gives you as an employee room to negotiate. Particularly where the employer initiated the dismissal, the clause is already legally under pressure.
Plan een vrijblijvend gesprek en ontdek wat we voor je kunnen betekenen.
Plan een gesprekThe most common outcomes in negotiations are:
- Complete removal: The clause lapses entirely, leaving you completely free to choose a new employer or start your own business.
- Shorter duration: Instead of one or two years, the clause is reduced to, for example, three or six months.
- Geographical restriction: The clause applies only to a specific region, for example a radius around your employer’s place of business.
- Conversion to a non-solicitation clause: You may work for a competitor, but may not actively approach your former employer’s clients or contacts within a certain period.
Which option suits you best depends on your role, sector, and the specific plans you have. Make sure you receive proper advice on this.
When is the clause legally challengeable
In addition to negotiating, there are situations in which the non-compete clause is also legally weak or even voidable. Under Article 7:653(3)(b) of the Dutch Civil Code, a court may wholly or partially void a non-compete clause if you as an employee are unfairly prejudiced by it in relation to the interest the employer seeks to protect. That assessment is always a matter of individual circumstances.
Situations in which the clause is particularly vulnerable:
- The clause is contained in a fixed-term contract without a written justification of a compelling business interest.
- Your employer gave you grounds to terminate the employment relationship (seriously culpable conduct).
- Your role changed substantially during the employment without the clause being agreed afresh.
- The duration or geographical scope of the clause is disproportionate in relation to your work.
New legislation is on the way
The government is working on a modernisation of the rules surrounding non-compete clauses. The bill introduces, among other things, a maximum duration of one year after the end of employment, an obligation for the employer to state the geographical scope, and a requirement to provide justification for all employment contracts — not only fixed-term ones. In addition, when invoking the clause, the employer must pay compensation of 50% of the last monthly salary for each month the clause applies. The precise date on which these changes will take effect has not yet been definitively determined at the time of writing; the bill must first be passed by both Houses of Parliament. Keep an eye on the official government channels for the most up-to-date position.
Why Arbeidsjurist Eindhoven
At Arbeidsjurist Eindhoven, we know exactly how to strengthen your position in negotiations. Whether it is a matter of having a non-compete clause removed entirely, limiting its duration, or assessing its legal validity: we always look at your specific situation and guide you through every step. Employees from Eindhoven and the rest of Brabant are in good hands with us. Get in touch for a no-obligation consultation and find out what is possible for you.
Frequently asked questions
Does my non-compete clause automatically lapse when I sign a settlement agreement?
No, that is a common misconception. A non-compete clause does not automatically lapse upon signing a settlement agreement. If you want to be certain that the clause no longer applies, this must be explicitly included in the settlement agreement. If the agreement makes no mention of the non-compete clause, a dispute may later arise as to whether the clause has lapsed or not.
Can my employer include a non-compete clause in the settlement agreement that was not there before?
Yes, an employer can attempt to do this. If you sign the settlement agreement containing that new clause without raising any objection, a court may rule that you have agreed to the clause afresh. Be vigilant about this and always review the draft text carefully — preferably with legal assistance — before signing.
Is my non-compete clause valid if I had a fixed-term contract?
Not necessarily. For a fixed-term contract, the employer is required to provide written justification in the employment contract explaining why there is a compelling business or service interest. If that justification is absent, the clause is in principle invalid. Always have this checked by an employment lawyer.
What if negotiating over the non-compete clause gets me nowhere?
If you cannot reach an agreement, you have a few options. You can refuse to sign the settlement agreement, in which case your employer must pursue termination through the UWV or the cantonal court. Alternatively, you can sign the settlement agreement and later, if your employer actually invokes the clause, apply to the court for it to be voided or restricted on the grounds of unfair prejudice. Seek advice on this, as the best strategy depends heavily on your personal circumstances.
What will change under the new legislation on non-compete clauses?
The Modernisation of Non-Compete Clauses bill introduces a maximum duration of one year, an obligation to specify the geographical area, a requirement to provide justification for all contracts (not only fixed-term ones), and an obligation to pay compensation of 50% of the monthly salary for each month the clause applies. The exact date of entry into force has not yet been determined; the legislation must first be passed by both Houses of Parliament.
We are happy to think along with you. For advice tailored to your situation we would gladly sit down with you. No rights can be derived from the content of this page and it may contain inaccuracies.
