Introduction
Non-compete clauses are a common provision in employment contracts. Employers use them to prevent employees from moving to a competitor or starting their own competing business after leaving the company. However, such a provision is not always legally enforceable. This blog explains when a non-compete clause is legally valid, what requirements the law imposes, and how judges assess in practice whether the clause holds up.
What is a non-compete clause, and why is it included?
A non-compete clause restricts an employee’s ability to work for a competing organization or start a similar business after the employment relationship ends. The reason for this is that employers want to protect their business interests, such as customer relationships, confidential information, or unique knowledge of products and processes.
Although the employer’s interests are recognized, a non-compete clause constitutes an infringement on employees’ freedom to change jobs. For this reason, the law sets forth clear requirements regarding the validity and proportionality of such a provision.
Non-compete clause in a fixed-term contract
In the case of temporary contracts, the scope for a non-compete clause is limited. The law stipulates that, in principle, a non-compete clause is not permitted in a fixed-term employment contract. However, an exception to this rule is possible if the employer:
- that provides a written explanation and
- The clause is necessary because there are compelling business or service interests at stake.
A general justification, such as “to protect confidential business information,” is insufficient. The justification must be tailored to the employee’s specific situation. If it is missing or not sufficiently substantiated, the clause is void and therefore not legally enforceable.
Non-Competition Clauses in Permanent Contracts
In employment contracts for an indefinite term, a non-compete clause is permitted, but limits apply here as well. The employer must be able to demonstrate that the clause is necessary to protect a legitimate business interest. It may not be used as a disguised means of retaining employees or restricting their mobility.
In addition, the clause must be reasonable and proportionate to the objective it seeks to achieve. The duration, geographic scope, and nature of the prohibited activities must be proportionate. If the clause is too broad, the court may limit it or set it aside entirely.
Not suitable for all positions
In practice, non-compete clauses are still regularly included in contracts for employees in operational roles, such as retail staff, drivers, or warehouse workers, where there is hardly any confidential information or strategic knowledge involved. In such cases, it is difficult to justify why non-compete clauses would be necessary.
When assessing the clause, judges consider the actual risks to the employer. If there is no clear reason to restrict the employee’s ability to find new work, the employee’s interests will take precedence. The clause may then be declared null and void in whole or in part.
Conclusion
A non-compete clause can be a useful tool for protecting an employer’s business interests, but it must not unreasonably restrict an employee’s mobility. The bar is set particularly high for temporary contracts and positions that do not involve access to confidential information. Employers would be wise to carefully draft and justify non-compete clauses. If in doubt about the validity of a clause, employees can seek legal advice to assess their position and determine whether the clause is legally enforceable.
This blog was written by Stijn Blom, Esq., an employment law attorney at Arbeidsadvocaat.nl B.V. Stijn has extensive experience in employment law and assists employers and employees on a daily basis with a wide range of employment law issues. From dismissal cases to drafting watertight agreements and policies—with his practical and personalized approach, he helps employers and employees move forward. Want to learn more? Visit Stijn’s page.
Arbeidsadvocaat.nl is happy to assist you if you have any questions about (non-compete) clauses. Please feel free to contact us .
April 2025