Member Article

A new bill on restrictive employment covenants has been adopted. Restrictive covenants concluded after 1 January 2016 will be subject to the new rules. We have listed some of the key changes below.

Non-competition clauses can now only be entered into with employees who hold a very special position of trust. Previously, it was only a requirement that the employee held a special position of trust.

For non-solicitation clauses, the changes have the effect that only customers with whom the employee has had commercial contact within the last 12 months can be comprised. Further, it is a requirement that the employee receives a list of the comprised customers in connection with the termination.

Furthermore, the length of a non-competition or a non-solicitation clause is maximized to 12 months after expiry of the employment. For combined clauses, the maximum enforcement period is 6 months.

The rules regarding compensation have also been amended. Clauses with an enforcement period up to 12 months or combined clauses with an enforcement period up to 6 months must be compensated with 60 per cent of the salary during the enforcement period. If either a non-competition or a non-solicitation clause with an enforcement period up to 6 months is agreed upon, the compensation is 40 per cent of the salary. If the employee finds another suitable job, the compensation will decrease to 24 or 16 per cent, respectively, as from the third month after expiry of the employment.

The act also entails that non-hire clauses can no longer be concluded, except in the case of a transfer of business and then only for a maximum period of 6 months.

It is important that employers take note of the new rules when drafting new employment contracts and make sure to update template contracts in accordance with the new rules in order to ensure that the non-competition and non-solicitation clauses are enforceable.