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Competition clauses to generate payments?
In October 2004, the Dutch Lower House adopted the Bill amending the rules pertaining to competition clauses. The Bill is now pending for approval by the Dutch Upper House. The purpose of it is to have employers and employees negotiate such clauses only in cases where employers have an actual interest.
The Bill provides that after an employment contract has ended, the employer must pay a fair amount during the term of the competition clause, the basic understanding being that competition clauses are enforceable for a maximum term of 12 months. Only in special cases will such amount not be payable to an employee, for instance if prior to dismissal an employer has released an employee from his obligations under the clause, or if an employee has agreed to waive payment. However, if this should unfairly prejudice the interests of an employee, the amount will still be payable.
All this means that employers may very well face problems if they simply include a competition clause in employment contracts as a matter of course.
If the Bill becomes law, it will be enforceable with immediate effect. Any competition clauses agreed before the Act having taken effect will not be governed by it.
For more information please contact Tanya van Nieuwstadt
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