Potential changes in legislation regarding Dutch (non)competition clauses

An overview of proposed revisions from 2025 

A majority of the Dutch Lower House of Parliament (Tweede Kamer) is advocating for restrictions on the validity of non-competition clauses. One significant proposed change is the practical prohibition of non-competition clauses for positions with salaries up to 1.5 times the median income. This is likely to bring about substantial adjustments for both employers and employees involved in employer-initiated terminations by 2025. Below, we delve deeper into the intended legislative revisions and their ramifications. Require guidance on competition clauses? Crowe Peak’s employment law experts are here to help. Reach out here. 

Revisions to non-competition clauses 

An increasing number of employees in the Netherlands are encountering non-competition agreements. While initially implemented by employers to safeguard their business interests, it has become apparent that these clauses are frequently utilized for alternative purposes, such as employee retention. This trend has adverse effects on the labor market, including impeding job transitions for employees and posing challenges for employers in recruiting new talent. 

To address the excessive use of non-competition clauses, the Dutch government has unveiled plans to modernize these clauses. These proposals include: 

• Establishing statutory limitations on the duration of non-competition clauses. 
• Imposing a legal obligation to define and justify the geographical scope of non-competition clauses. 
• Mandating compensation for employees, calculated as a percentage of their last salary earned, when non-competition clauses are enforced. 
• Requiring employers to demonstrate compelling business interests and provide rationale, even for indefinite employment contracts, mirroring the criteria for fixed-term contracts. 

Potential further restriction for salaries below 1.5 times the median 

An additional amendment may be appended to the aforementioned list. This stems from the Tweede Kamer’s adoption of a motion during its deliberation on the aforementioned bill, aimed at further restricting employers’ discretion. Should this proposal be enacted, a non-competition clause could be deemed invalid if entered with an employee earning less than 1.5 times the Dutch median salary for full-time employment (being approximately €66,000, inclusive of vacation allowance and fixed benefits). This modification may potentially be applied retroactively. 

What is next? 

In the wake of the approved motion concerning salaries below 1.5 times the median, the minister is presently drafting a new bill. This forthcoming legislation is slated to undergo public consultation on the internet (internetconsultatie) shortly. At this moment it is not clear what the scope of influence of the amendment will have on the relation clause (relatiebeding). The government’s objective is to enact the new regulations by January 2025. Are you pondering whether this legal amendment will impact employment contracts within your organization? Or perhaps you are curious about the services our employment law experts and payroll professionals can provide? Do not hesitate to contact us. You can utilize the provided form or contact us directly at +31 88-2055000.