When is a non-compete clause in a fixed-term employment contract valid?

A non-competition clause in a fixed-term employment contract is, in principle, not permitted and is therefore void. The law (Article 7:653, paragraph 2 of the Dutch Civil Code) makes only one exception: the clause is only valid if the employer in writing and with reasons that the clause is necessary due to compelling business or service interests. If such reasons are lacking, or if they are too general, the clause will not stand up in court. In practice, only a small proportion of these clauses pass the test.

The underlying rationale is that an employee with a temporary contract would otherwise suffer a double disadvantage: they are bound by a contract of limited duration while simultaneously being unable to freely switch to a new job. Therefore, the legislator imposes a stricter requirement for a temporary contract than for a permanent one. Case law subsequently rigorously assesses this weighty interest on various fronts. We at MKB Juristen explain below how this assessment works, where things usually go wrong, and what this means for you as an entrepreneur. It should be clear that drafting a non-compete clause is best left to a legal specialist.

What is a non-compete clause in a temporary contract?

A non-compete clause is an agreement that restricts an employee's ability to work for a competitor or start a competing business after the termination of employment. It protects commercially sensitive knowledge, customer contacts, and know-how.

In the case of an employment contract for an indefinite period, such a clause is generally permitted under certain conditions. For a employment contract , the opposite principle applies: inclusion is, in principle, not allowed unless the employer expressly and in writing justifies that there is a compelling business or service interest. This justification must be included in the clause itself and be present at the time the contract is concluded.

Note the difference between a non-solicitation clause and a confidentiality clause. A non-solicitation clause specifically prohibits approaching the employer's clients or business relations and is generally treated in case law as a form of non-competition clause; therefore, the requirement for justification also applies to this in the case of a temporary contract. A confidentiality clause only concerns the non-sharing of confidential information and falls outside the justification requirement of the non-competition clause. Anyone wishing to bind a temporary worker can often cover a great deal with a well-drafted confidentiality clause without the stringent requirements of a non-competition clause.

Formal review of the non-compete clause

The judge first examines whether the non-competition clause meets the formal validity requirements. For instance, the employee be of legal age and the clause must in writing . Since this concerns a temporary contract, the judge also checks whether the clause is substantiated and whether that substantiation shows which compelling business or service interests are being invoked.

The justification must have substance

During the formal review, the judge examines not only whether a justification is present, but also whether it any substance . A standard non-compete clause with a vague substantiation such as “given the specialized nature of the activities” lacks sufficient substance to be valid. A general enumeration lacking sufficient depth does not necessarily immediately lead to nullity, but will almost certainly fail the substantive test further on.

Invalidity of the non-compete clause

If not all formal conditions are met , the court is not required to conduct a further review, and the non-competition clause is void . The clause is also void if the justification is added only after the employment contract has been entered into. A void clause has never taken effect and can therefore no longer be annulled; the employer's claim is then dismissed.

Substantive review of the non-compete clause

If the clause passes the formal test, the judge assesses it on the merits. In doing so, the judge examines whether the reasoning actually aligns with what is understood as a substantial business or service interest. If this is not the case, the judge may annul the non-competition clause in its entirety. The wording of the law and the parliamentary history offer little guidance on this matter, meaning that its interpretation depends heavily on case law.

Insufficient weighty interest

If it appears that the employer has insufficiently substantiated the clause and that a compelling interest is lacking, the non-competition clause is voidable. In that case, the judge may not proceed to a balancing of interests: without a compelling interest, the clause fails.

Indeed a significant interest

It is clear that the courts are strict in their judgments. Clauses that do pass the substantive test are the exception rather than the rule. What stands out in those cases is that the non-compete clause specifically for the position and the individual employee , had a clear and concrete justification , and not formulated too broadly , for example by limiting itself to the areas or sectors where the employer may genuinely face competition.

Balancing of interests regarding the non-compete clause

If the clause has passed the formal and substantive test, it is valid in principle. The judge then takes into account the interests of both parties : on the one hand, the employer's interest in preventing sensitive knowledge from falling into the hands of a competitor; on the other, the position and financial situation of the employee. The judge only intervenes in the event of unfair disadvantage to the employee . He may then annul the clause in whole or in part , for example by allowing certain forms of competition or limiting the duration.

Practical example: when does the clause hold up?

Suppose you run a software company and hire a developer for one year to work on a unique, as-yet-to-be-released product. This employee is granted access to the source code, the product roadmap, and your key customer contacts. In the clause, you specifically define exactly what knowledge he acquires, why that knowledge would cause damage to a direct competitor, and you limit the prohibition to competitors in the same product niche for a duration of one year.

Such a justification tailored to the position makes it plausible that there is a compelling interest. Compare that to a standard phrase like “employee is not allowed to work in IT anywhere in the Netherlands for two years”: too broad, unsubstantiated, and virtually without a chance in court. The difference lies not in the legal wording, but in the concrete substantiation and proportionality.

Upcoming legislative change: modernization of the non-compete clause

There is a legislative proposal to modernize. At the time of writing, this proposal has not yet entered into force; the final content and effective date may still change during the consideration. As an entrepreneur, however, please bear in mind that the rules may become stricter.

In the form proposed so far, it concerns, among other things, the following points:

• A statutory maximum duration for the clause after the termination of employment.
• An obligation to explicitly state the geographical area in which the employee is restricted
• Extension of the obligation to substantiate substantial business interest to all contracts, including those for an indefinite period.
• A potential obligation for the employer to pay compensation if the clause is invoked; the consultation version concerned compensation linked to the last earned monthly salary. The precise amount and conditions have not yet been determined.
• The requirement that the employer invokes the clause in a timely manner and in writing before the end of the employment relationship.

For temporary contracts, little changes at its core: the substantiated exception remains the starting point. However, the proposal underscores that a concrete and proportionate clause will become the norm. Therefore, have your existing clauses reviewed so that you are not faced with surprises once the new rules come into effect.

What does this mean for you as an employer?

For entrepreneurs, it boils down to this: a non-compete clause in a temporary contract stands or falls with the justification. That justification must be in place at the time of signing, must be concrete, and must align with the specific position. A standard text copied from a template is virtually doomed to fail.

• Make it concrete: describe the work, the access to confidential information, and the specific interest you are protecting.
• Make it personal: tailor the motivation to this position and this employee, not to the organization in general.
• Keep it proportional: limit duration, geographic reach, and scope to what is truly necessary.
• Put it in writing on time: a justification added later renders the clause void.
• Consider an alternative: sometimes a confidentiality or non-solicitation clause suffices to protect your interests, with less legal risk.

Frequently Asked Questions

Is a non-compete clause allowed in a temporary contract?

In principle, no. It is only valid if the employer provides written justification in the clause that it is necessary due to compelling business or service interests. Without that substantiated exception, the clause is void.

What is a substantial business or service interest?

This concerns a concrete and serious interest of the employer, such as the protection of specific know-how, sensitive business information, or customer relationships. A general reference to “specialized work” or an “established network” is usually insufficient; the judge requires substantiation tailored to the position and the employee.

What happens if the justification is missing or too vague?

If the justification is missing, the clause is void and never took effect. If the justification is present but substantively too weak, the court may annul the clause. In both cases, the employer cannot derive any rights from it.

Can the judge partially uphold a non-compete clause?

Yes. If the clause passes the initial tests but unfairly disadvantages the employee, the judge may partially annul the clause, for example by limiting the duration or scope of work instead of striking down the entire clause.

Can a non-compete clause be rectified retroactively?

No. Because everything revolves around the justification provided when concluding the contract, missing or insufficient substantiation cannot be rectified later. Therefore, it is crucial to draft the clause correctly from the start.

Does the clause also apply to the extension of a temporary contract?

For every new or extended temporary employment contract, you must reassess whether the non-compete clause has been correctly included and justified. Preferably, explicitly reinclude the clause and the current justification to avoid any dispute regarding whether it has still been validly agreed upon.

Will anything change due to the announced legislative amendment?

There is a legislative proposal to modernize non-compete clauses, including a maximum duration, a mandatory geographical scope, and possible compensation upon invocation of the clause. This has not yet entered into force and may still change during the consideration. Have your clauses reviewed in a timely manner so that they remain valid under the new rules.

Have your non-compete clause drafted by a specialist

Very few non-compete clauses in temporary contracts withstand all judicial scrutiny. Because everything stands or falls with the justification, even the best lawyer cannot salvage a flawed clause after the fact. Therefore, never draft a non-compete clause yourself for a fixed-term employment contract.

The employment law specialists at MKB Juristen assess your situation and draft a clause tailored to the position and the employee, with a justification that stands up to scrutiny. View our expertise in employment law or schedule a no-obligation intake consultation. During that consultation, we will discuss whether a non-compete clause is sensible and feasible in your case.