Netherlands: “Is a Non-Compete Clause still Legally Valid after a Contract Takeover”?

It regularly happens, especially within a group, that the employee transfers from one employer to another. Nothing exciting, there is (in principle) no transfer of undertaking and usually the work for the employee remains the same. The new employer, another company within the same group, must take over the employment contract and this must be confirmed by both parties – employer and employee. This was also the case at TMC. The employee was first employed by TMC Zuid and then by TMC Manufacturering Support. Both companies are part of the same group. To confirm the contract takeover, the new employer has drawn up a neat note confirming that “The rights and obligations arising from the employment contract will remain unchanged.” The employee signs the letter and enters into employment with TMC Manufacturering Support.

That’s well organized, right? The employee thought otherwise. It wished to switch to YER, but YER as a company fell within the scope of the non-compete clause agreed between TMC Zuid and it. Has that clause been transferred to TMC Manufacturering Support?

The District Court of Oost-Brabant ruled that this is not the case. It is insufficient to refer in generic terms to ‘all rights and obligations’ that are transferred with a contract takeover. The acquiring (new) employer must: 1) either specifically state in the letter that the non-competition clause will be maintained; or 2) attach the document containing the non-competition clause to the letter. The generic reference used by TMC Manufacturering Support was insufficient and the non-competition clause lost its legal force due to the contract takeover.

Is the employee changing (formal) employers, and are you not drawing up a completely new employment contract? Then refer very specifically to all restrictive clauses that must continue to apply in order to avoid the risk of loss of legal force between the parties.

Read the full judgment here.

By Hocker, Netherlands, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact netherlands@transatlanticlaw.com

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