Clauses in employment agreements

In an employment agreement, several clauses can be included. The most common are non-competition and non-solicitation clauses, the study costs clause, but also a prohibition on engaging in other paid activities and a penalty clause. By laying down clauses correctly in an employment agreement, you create as much legal certainty as possible and your interests are properly protected.

The legislator has included separate provisions for clauses in the law. The law states for example how special clauses have to be effected and whether it is possible to derogate from the clauses at a later moment.

1. Competition and solicitation clauses

The law only know a provision relating to the competition clause. There is no separate provision for the solicitation clause, since this is seen as a specific form of the competition clause. The legal provisions applying to competition clauses, are also applicable for solicitation clauses.

A competition clause limits the freedom of the employee to work elsewhere after the termination of the employment agreement. The solicitation clause prohibits the employee to stay in contact with relations of the employer after the termination. Because the consequences of a competition clause can be far-reaching, it is ordered that it has to be agreed upon in writing.

After July 1st 2015 a competition clause in principle is only valid if it is linked to an employment agreement for an indefinite period. If an employer wants to include a competition clause in an employment agreement for a definite period, this can only be valid if the employer has motivated inside the employment agreement that one or more substantial interests exist. Often also a geographical  scope is included in the competition clause, as well as a period.

A competition clause can be nullified fully or partially by a judge. Partial nullification entails for example that the period during which the clause is valid is shortened, but also that the geographical scope is limited. The judge will weigh the parties’ interests before deciding on fully or partially nullifying the clause.

2. Study costs clause

In a study costs clause an employer and employee agree that the employer has to pay back (a part of) the study costs to the employee (in most cases at the end of the employment agreement). In principle parties are free to agree upon a study costs clause, but the Dutch Supreme Court has established several conditions for a study costs clause. One of those conditions is for example that the period, in which the employer is supposed to have profited from the knowledge and skills following from the study, has to be determined. Next the obligation of the employee has to be laid down explicitly that if the employment agreement is ended during or directly after the study period, the wage over that period has to be paid back to the employer. This repayment arrangement has to decrease proportionally over the determined period (sliding scale).

3. Clause on engaging in other paid activities

A prohibition on engaging in other paid activities implies that the employee may not engage in other work besides the activities he or she performs for the employer. An employer of course can give the employee explicit permission. A prohibition on engaging in other paid activities lasts for the same period as the employment agreement.

4. Penalty clause

A penalty clause can be included in the employment agreement. The employee has to pay this penalty when the employee violates the conditions that have been agreed upon. Only a judge may limit the height of the penalty.

A properly motivated and explained clause can prevent problems. We are more than willing to run through the contractual clauses, to assure you that you have as much legal certainty as possible and that your interests are protected properly.