Non-compete clauses in indefinite-term employment contracts are generally enforceable under Dutch law if the clause was validly agreed and has not lost its effect over time as a result of major changes in the employment relationship. However, a valid non-compete clause can be annulled (or suspended) in whole or in part under certain conditions.  

A court may annul, modify or suspend a non-compete clause if the employee is unfairly disadvantaged in relation to the interests of the employer that the clause seeks to protect. If the disadvantage to the employee outweighs the employer’s interest, the duration or geographical scope of the clause may be limited.  

The employer’s interest in enforcement of the clause may lie, for example, in the impairment of know-how, the employee’s knowledge of trade secrets, or the possible loss of customers. If the employer’s interest relates only to binding the employee to itself, that interest is not protected and the employer risks having the clause (partially) annulled or suspended by the court.  

Factors considered in the balancing of interests include (among others) how much the employer has invested in the employee’s training and skills, what kind of employment contract is involved, how long the employee has been employed, the employee’s salary and his/her chances in the labour market, whether the employee has been compensated for enforcing the non-compete clause, and how the employment contract ended. 

Employees regularly argue that they have the prospect of a significant improvement in position (and corresponding salary increase) with the new employer and are therefore unfairly disadvantaged by the enforcement of the non-compete clause. The court usually takes such a circumstance into account in the balance of interest in the employee’s favour. However, a recent ruling by a Dutch court shows that this can sometimes weigh in favour of the employer’s interest in enforcing the non-compete clause. 

This case involved an employee employed as a Junior Trader by an employer that trades dairy products globally. The employee terminated his employment contract to join a competitor in the position of International Sales Manager. The now former employer claimed that this constituted a breach of the non-compete clause, and the employee sought suspension or limitation of the non-compete clause and penalty clause. 

The court upheld the non-compete clause. It was established that both companies trade the same products in the same industry. The former employer had an interest in ensuring that its strategies relating to the dairy trade would not reach the new employer. The former employer also made a sufficiently plausible showing that the former employee had competitively sensitive information such as customer information, technical product knowledge of all suppliers and customers, and purchasing, sales and product strategies.  

Although the former employee’s new position would differ in content from his position with the former employer, the court held that this did not mean that the competition-sensitive information that the ex-employee presumably possessed would not reach the new employer. In this regard, the court considered that precisely because of the substantial salary increase offered by the new employer, the ex-employer rightly feared that the new employer would want to make use of the former employee’s knowledge of the former employer’s working methods and that this could affect its business. Therefore, the former employer had a compelling interest in enforcing the non-competition clause. 

The court then tested the employee’s interests, but these did not carry sufficient weight. The court noted (again) that there had indeed been a significant improvement in the employee’s position, as he could earn 40% more with the new employer. However, this very fact also raised questions about the new employer’s motives for offering such a high salary. The court therefore ruled that the non-compete clause remained in full force. 

Case law thus shows that a position improvement is not always an argument in favour of employees seeking to modify or annul a non-compete clause. In some situations, such a position improvement can actually (further) substantiate that there is a risk of impairment of the business and that the non-compete clause should therefore be enforced in full.