The non-competition clause and the WSA

Changes

With the adoption of the Work and Security Act the rules on the non-competition clause have changed as well. Such a clause can for example only be included in an employment contract with a fixed term when a company has a compelling corporate interest, which justifies such a clause. This must be extensively elaborated in the contract.

Modifying contracts

Many employers did not yet modify their contracts and keep old clauses alive with the consequence that the complete non-competition clause in fixed-term contract can become inoperable. It is unclear for many what the legislation exactly entails, what is meant by compelling corporate interests and how contracts should be modified. Case law will have to clarify this and the first judgments are out as of this moment. An outline:

Transitional law

What happens with contracts concluded before the 1st of January 2015 (the effective date of the legislation) and which are tacitly renewed? The court of Overijssel provided an answer on the 15th of September 2015. On the 1st of April an employee and employer decide to renew a fixed-term contract of one year until the 31st of December 2015, under the same conditions. The employee recites the contract however on the 1st of August and wants to enter in service at the opponent. She is of the opinion that the non-competition is not applicable, because she has a fixed-term contract in which the clause is not sufficiently elaborated. The district court agreed. The renewal of the contract on the 1st of April 2015 can be qualified as an employment contract on which the new Act is applicable. (art. 7:653 DCC) Therefore there is no valid non-competition clause.

Compelling corporate interest

When can a ‘compelling corporate interest’ be established, which is important with regards to fixed-term contracts? At this moment there has not been any case law in which such an interest has been established and the court of Amsterdam ruled that such an interest is hard to establish without any concrete insights from the Work and Security Act or its parliamentary history. The latter only speaks of ´specific activities or specific positions which also need a case-by-case consideration and motivation´. 

The literature agrees that this interest entails a heavy burden of proof, looking at the starting principle that a non-competition clause in a fixed-term contract is not valid.

Other solutions?

An employer tried to come up with some criteria, like protection of the network, market area and needs and lastly the methods of the employer. The judge found these criteria too generally formulated and argued that it lacked a description of specific knowledge and/or (confidential) business intelligence which can be obtained by the employee and which has to be protected by the non-competition clause. In this respect it is also important that this specific employer was a deployment agency, which deployed its employees at different clients. Moreover, the activities of its employees can differ in every single case. The fact that the employer invested in the employees via the different clients, which gave the employees work experience, did not justify the claim on the non-competition clause. It had to be clarified why the non-competition clause itself was the most effective tool to ensure loyalty, instead of a study cost or secrecy clause. The judge therefore nullified the non-competition clause.

The district court of Groningen ruled similarly in a case where an employer could not justify a non-competition clause because of a lack of a compelling corporate interest. Even the fact that the activities of the employee at his company overlapped greatly with his new activities did not matter.

Specific knowledge and experience

In another case it has not been proven that an employee misused important and exclusive business intelligence, which he only could have obtained at the employer. This intelligence did not include acquired knowledge and experience from normal activities and had to be very specific knowledge and experience. An example of this can be the network of the employer. The judge furthermore noted that the interest of the corporation decreases after some time, especially since there were 221 more aid workers who offered similar aid and counsel. The court therefore found that there was a lack of a compelling corporate interest and quashed the non-competition clause.

These judgements show that courts are very strict with respect to the motivation of a non-competition clause and show that in principle such a clause is not allowed in fixed-term contracts. The corporate interests must be described very concrete and specific and it has to be motivated why a non-competition clause will protect these interests.

If you want advise on non-competition clauses, please contact our attorney mr. Suzanne van Dijsseldonk. She has much experience with handling disputes arising from non-competition clauses.