You can include a non-compete clause in your employee’s employment contract to protect your business interests when they leave your employment. This clause prevents them from working for your competitor or from starting a similar enterprise after resigning.
What does a non-compete clause include?
You can determine what to include in the non-compete clause. It may contain provisions such as:
- the kind of work it applies to
- competitors you do not want your former employee to work for
- restrictions on geographical areas
- applicable time period, usually 1 or 2 years after resignation
- possible penalties
The non-compete clause must be clear on what is and what is not allowed. The clause may not limit your employee unreasonably. It may not be impossible for your former employee to work in another place.
Please note: Make sure that your non-compete clause remains up to date. Change it, for example, if your employee takes up a new position or if you expand your territory, or the number of branches.
When is a non-compete clause valid?
A non-compete clause is only valid if:
- it is agreed upon in writing, for instance in an employment contract, or in the employment conditions
- your employee agrees in writing to this clause. For instance by signing the contract, or a letter which refers to your employment conditions
- your employee is 18 years old or over
Non-compete clause for permanent or fixed-term contract
You may only include a non-compete clause in a permanent contract. You cannot include a non-compete clause in a fixed-term (temporary) employment contract, unless 'legitimate business interests' are at stake. You must specify these business interests explicitly in the employment contract.
A non-solicitation clause is a type of non-compete clause. With a non-solicitation clause you protect your client base, suppliers, and other business relations. After dismissal an ex-employee cannot contact your clients or take your customer base with them. They may start working for your competitor, if your competitor is not a business relation of yours.
You can only include a non-solicitation clause in a permanent contract. You can only include a non-solicitation clause in a fixed-term (temporary) contract if you specify the necessity in the employment contract.
Failure to comply with the non-compete clause
If your ex-employee fails to comply with the non-compete clause, you can go to court. The court can force your ex-employee to comply with the clause by imposing a penalty. You may also claim damages. The court will take your ex-employee’s interests into account as well. In doing so, it may decide the clause is not applicable (anymore).
Your ex-employee can ask the district court if the non-compete clauses in the contract are necessary and legitimate. If you fail to properly substantiate the non-compete clauses, the district court may void the clauses.