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If in a fixed-term employment agreement, a non-compete clause has validly been entered into and this agreement is renewed tacitly, will the non-compete clause in that case remain in force?
An employment agreement can be entered into for a fixed term. In a fixed-term employment agreement, the period for which the agreement is entered into will be mentioned. Such duration will usually be expressed in a time unit and the term will be a number of months or years. The fixed-term employment agreement will in principle end by the expiry of the period for which the agreement has been entered into.
Frequently, parties do not discuss the renewal of the employment agreement prior to the end of the period for which it has been entered into, while the employee continues to perform his duties after the agreed end date. On the basis of the law, in this case, in principle the employment agreement is entered into for the same term as the earlier employment agreement, with a maximum duration of one year. These rules may be derogated from in a Collective Bargaining Agreement. Such a tacitly renewed employment agreement shall be deemed to have been entered into under the same conditions as the previous employment agreement.
To validly enter into a non-compete clause, two formal requirements must be met. Firstly, such clause can only be entered into with an employee of age. Secondly, the clause must be agreed in writing.
Non-compete clause in case of tacit renewal
Now what if in a fixed-term employment agreement, a non-compete clause has validly been entered into and this agreement is tacitly renewed; will the non-compete clause remain in force?
Several judges have examined this question in the past. Unfortunately, not with an unambiguous outcome. There are subdistrict judges who believe that the stringent requirements of the requirement to set out in writing (schriftelijkheidsvereiste) are not fulfilled when the non-compete clause is not explicitly agreed in writing again, but there are also judgments that point in the opposite direction.
‘s-Hertogenbosch Court of Appeal 8 January 2013
On 8 January 2013, the ‘s-Hertogenbosch Court of Appeal considered the question as to whether a non-compete clause remains in force after a tacit renewal of the previous employment agreement.
He is of the opinion that the tacitly renewed employment agreement has been entered into on the conditions of the previous employment agreement. Also in respect of the non-compete clause.
For a non-compete clause that has been validly agreed upon, there seems to be no exception in case of a tacit renewal of the employment agreement. In order to avoid a discussion with the employee, and in order to be on the safe side, my recommendation to the employer in such a case is to agree again in writing in respect of the non-compete clause as well, prior to the expiry of the employment agreement.