Non-compete clause in the settlement agreement during a dispute: waive it or not?

The non-compete clause in the settlement agreement

If you are in the middle of an employment dispute and a settlement agreement (VSO) has been placed on the table, the non-competition clause is one of the most decisive points. Whether you are considering a new job in the same sector or starting your own business, whether that clause remains in force or lapses has significant consequences for your future. It is therefore wise not to simply overlook this matter.

What is a non-competition clause and why does it appear in the VSO?

A non-competition clause is an arrangement in your employment contract by which your employer prohibits you from working for a competitor or starting a competing business after the employment relationship ends. Sometimes this clause also applies within a limited geographical area, a particular sector, or a defined period.

In the settlement agreement, your employer will generally confirm that this clause remains in force, unless you actively negotiate for it to lapse. The latter is precisely where many employees miss an opportunity.

When can you challenge the clause or have it declared lapsed?

Not every non-competition clause is automatically valid. There are situations in which the court nullifies a clause in whole or in part. Consider the following:

• The clause was never agreed in writing or is absent from the original contract.
• You have a fixed-term contract, whilst the law sets strict requirements for non-compete clauses included in such contracts.
• The circumstances have changed so significantly that the clause weighs more heavily on you than was anticipated when you signed it.
• The employer has itself acted seriously at fault, for example by putting pressure on you or allowing the conflict to escalate.

In an employment dispute where the employer has itself contributed to the breakdown of the relationship, you sometimes have a stronger negotiating position than you might think.

Negotiating during the settlement agreement phase

The settlement agreement is not a dictate. It is a negotiating document. This also applies to the non-compete clause. Employers are not always willing to drop the clause outright, but there are several ways in which you can reach a reasonable outcome.

Practical options to negotiate:

• Volledig laten vervallen: explicitly request the removal of the clause from the settlement agreement.
• Geografische beperking: limit the clause to a smaller geographical area, for example only the Eindhoven region rather than the whole of the Netherlands.
• Tijdbeperking verkorten: a clause of two years may potentially be reduced to six or twelve months.
• Branchebeperking: ensure the clause applies only to direct competitors, not to the entire sector.
• Vergoeding bedingen: if the clause remains in place, financial compensation within the settlement agreement is sometimes open to discussion.

Which option is realistic depends greatly on your role, the industry, and the reason for the dismissal. Do not be caught off guard by a standard settlement agreement presented to you by your employer.

What if your employer refuses to amend the clause?

If the employer is unwilling to move, that does not mean you are powerless. You can refuse the settlement agreement and still challenge it through the courts, or you can have the clause assessed separately by a court. A court has the authority to annul a non-compete clause in whole or in part if the employee's interests outweigh those of the employer.

Do bear in mind that litigation takes time and money. That is precisely why the settlement agreement stage is the ideal moment to negotiate: you have something the employer wants (a smooth and discreet conclusion), and that gives you more leverage than you might expect.

Non-solicitation clause: don't overlook this

In addition to the non-compete clause, many employment contracts also contain a non-solicitation clause. This prohibits you from contacting clients or business relations of your former employer after your departure. In a settlement agreement, both clauses are sometimes used interchangeably or combined.

Check the settlement agreement carefully for a non-solicitation clause as well. The approach when negotiating is similar: try to limit the clause in terms of scope, duration, or client group.

Why Employment Lawyer Eindhoven

When facing an employment dispute in the Eindhoven or Brabant region, there is a great deal to contend with. A non-compete clause that remains in force can restrict your career for years. We scrutinise the settlement agreement in front of you, assess whether the clause is legally enforceable, and support you during negotiations with your employer.

Would you like to know what your options are? Read more on our page about Settlement agreement in a conflict situation: your rights and approach or contact us without obligation. We are happy to think things through with you.

Frequently asked questions

Can I have a non-compete clause set aside through the settlement agreement?

Yes, that is possible. In the settlement agreement you can explicitly state that the non-compete clause no longer applies. This does require your employer's agreement, so negotiation is essential. Seek assistance from an employment lawyer to assess which arguments you can put forward.

What if the non-compete clause in my contract is not legally valid?

If the clause has not been recorded in writing, is absent from a fixed-term contract without adequate justification, or weighs more heavily on you due to changed circumstances, you can challenge its validity. A court may then annul the clause in whole or in part.

Am I entitled to receive compensation if the non-compete clause remains in force?

The law does not automatically require this in most cases, but stricter rules apply to fixed-term contracts. During settlement agreement negotiations you can, however, stipulate financial compensation in return for accepting the clause. Whether that is achievable depends on the specific situation.

Does a non-solicitation clause work the same way as a non-compete clause?

No, although they are similar. A non-solicitation clause prohibits contact with the employer's clients or relations, whereas a non-compete clause prohibits working for a competitor or setting up a competing business. Both can be addressed in a settlement agreement and both are negotiable.

We are happy to think along with you. For advice tailored to your situation, we would be glad to talk. No rights can be derived from the content of this page and it may contain inaccuracies.