The 5 limits of the non-compete clause

A non-compete clause protects your company, but it is not valid without limitation: it has limits regarding validity, duration, geography, type of work, and type of employer. A clause that is too broad or poorly substantiated will not stand up in court. Below, you will find the five limits of the non-compete clause, so that you can draft a clause that does hold up.

1. Limits to validity

First, pay attention to validity. According to the law, a non-compete clause in a temporary contract in principle not valid, unless there are compelling business or service interests. The employer must demonstrate these, and the justification must be explicitly stated in the contract. If a dispute arises later, the judge will only consider the arguments included in the contract. Therefore, be very specific.

2. Time limitation

A non-compete clause must be reasonable, and its duration is important in this regard. Generally, a period of one to two years after the termination of employment is considered reasonable. A longer period may be unreasonable, given the adverse consequences for the employee, who struggles to find a new job. The duration of employment and the position also play a role.

3. Geographical limitation

In addition to a time limit, there is often a geographical restriction, aimed at the region where the employer may experience competition. This too must be reasonable and can vary from the employer's own province to the entire Netherlands or even beyond, depending on the nature of the company and the work.

4. Type of work

A non-compete clause is generally intended to prevent the employee from performing the same type of work for a new employer. Reasonableness applies here as well: the clause must not unduly hinder the employee in finding a new job.

5. Type of employer

Finally, the principles of reasonableness and fairness set limits on which employers are excluded. It is reasonable to target competitors and the starting of a competing business of one's own. However, prohibiting the same position at, for example, a foundation with non-competing activities is much more difficult to justify.

TODO_VERIFY: The statutory regulations regarding non-compete clauses (Art. 7:653 BW) and potential legislative changes concerning the modernization of non-compete clauses are in flux — check current requirements before drafting a clause.

Frequently Asked Questions

Does a non-compete clause apply in a temporary contract?

In principle not, unless the employer expressly justifies compelling business or service interests in the contract.

How long may a non-compete clause last?

One to two years is generally considered reasonable. A longer duration may be unreasonable, depending on the circumstances.

Can the judge mitigate a non-compete clause?

Yes. The judge can limit or invalidate an overly broad clause if it unfairly disadvantages the employee in relation to the employer's interest.

Do I need to adjust my non-compete clause for a new position?

Yes, that is wise. In the event of a significant change in function, an existing clause may lose its effect. Revise the clause in a timely manner.

Drafting or revising a non-compete clause?

A common mistake is “forgetting” a non-compete clause after it has been included in the contract. Just like your company, your clause must keep up with the times. We draft your non-compete clause, review it, or revise it upon a new position.

View our non-compete clauses or our employment law expertise , and schedule a no-obligation intake consultation .