Non-compete clause: common mistakes and pitfalls

The biggest pitfalls of non-compete clauses are: failing to record the clause in writing, not including a justification for a temporary contract, choosing an overly broad duration or geographical area, referring to an unsigned manual, and formulating a penalty clause unclearly. Any of these errors can render the clause void or lead to the court mitigating it pursuant to Article 7:653 of the Dutch Civil Code. A clause that appears strict on paper often offers no protection whatsoever without these points of attention.

The short answer

• Not in writing: an oral or unconfirmed stipulation is invalid.
• No justification for a fixed term: renders the clause void.
• Too spacious: duration too long or area too large is moderated.
• Reference to manual: unsigned document does not count.
• Vague penalty clause: unclear amount is difficult to enforce.

Most common non-compete clause pitfalls

Many pitfalls regarding non-compete clauses arise because employers use a standard clause without adapting it to the specific situation. The clause may appear complete, but it fails as soon as an employee challenges it. The law imposes strict requirements on form and content, and it is precisely on these points that things go wrong.

Below are the most common mistakes in practice, with how to avoid each pitfall.

Pitfall 1 — ignoring the written requirement

A non-compete clause is only valid if it has been agreed upon in writing with an adult employee. However, it sometimes happens that the clause is discussed verbally but is not included in the signed contract, or that reference is made only to a collective labor agreement or employee handbook that the employee never signed.

That is generally insufficient. Always include the clause in the employment contract itself, above the signature, or in a separate document that the employee expressly accepts. Without a signature, the clause is not legally binding.

Pitfall 2 — no justification for a temporary contract

In principle, a non-competition clause is prohibited in a fixed-term employment contract. It is only permitted with a written justification of compelling business or service interests. A common mistake is copying a clause from a permanent contract without adding that justification.

The consequence is harsh: the clause is void. A second pitfall is a justification that is too general, such as “to protect business interests.” This is not accepted. The substantiation must specifically indicate why precisely this position and employee require protection.

Pitfall 3 — an overly broad clause

A clause with a term of several years, a national or even unlimited area, or a prohibition on “any conceivable activity” is almost always too broad. Pursuant to Article 7:653 paragraph 3 of the Dutch Civil Code, the judge weighs the employer’s interest against that of the employee. If the clause is too broad, it is moderated or annulled in its entirety.

Prevent this by opting for a reasonable duration (often six to twelve months), a concretely defined area, and a specific description of the prohibited activities that aligns with the company's field of activity.

Pitfall 4 — referring instead of recording

Employers sometimes refer to an employee handbook, employment conditions regulations, or a collective labor agreement for the clause. If the employee has not personally signed that document, there is a high probability that the clause was not validly established. In that case, the warning function of the written requirement is not fulfilled.

The safe route is to include the clause in its entirety in the signed employment contract. Reference is only permitted if the document is attached and the employee has demonstrably confirmed receipt and acceptance thereof.

Pitfall 5 — an unclear or excessive penalty clause

A penalty clause simplifies enforcement, but only if it is clear. Mistakes include a vaguely formulated amount, a penalty disproportionate to the salary, or failing to explicitly stipulate that full compensation for damages may be claimed in addition to the penalty. The judge may reduce an excessive penalty.

Formulate the amount concretely, keep it proportional, and explicitly regulate the relationship to compensation for damages. This ensures the penalty clause remains usable.

Announced legislative change as a future pitfall

A tightening of the rules has been announced. Expected are, among other things, a statutory maximum duration, a mandatory geographical demarcation, a duty to provide justification even for permanent contracts, and possibly compensation to the employee. Clauses that are currently too broad may fail even sooner. A new pitfall is therefore clinging to old, broad clauses. The final content and date had not yet been determined at the time of writing.

Honest recommendation

You avoid most pitfalls with a limited, concrete, and written clause. For a simple situation—a permanent contract, short duration, and a specific geographical area—you can often arrange this basic framework yourself without a lawyer. However, do seek assistance for a temporary contract (justification), a key position, a broad scope, or a substantial penalty clause, as the risks of nullity and mitigation are greatest in those cases. Have an existing clause reviewed periodically, certainly in view of the announced legislative changes.

Also read the non-compete clause checklist and non-compete clause example. You can arrange customization via the non-compete clause.

Frequently Asked Questions