The Transparent and Predictable Terms of Employment Act
The Dutch Transparent and Predictable Employment Terms Act (Wet transparante en voorspelbare arbeidsvoorwaarden), which we wrote about in an earlier blog, took effect on 1 August 2022. This act includes a new statutory provision (Article 7:653a of the Dutch Civil Code (BW)) which stipulates that a ban on carrying out ancillary activities is void unless the employer has an objective justification for it.
First ruling on the new ancillary activities law
Meanwhile, the Haarlem Subdistrict Court has handed down the first ruling in this regard. This case involved an employee who had asked her supervisor if she could leave employment with a settlement agreement so that she could apply for unemployment benefits. The supervisor had said they would discuss this internally, after which the employee informed her colleagues that she was leaving her employment. The employer then took the position that the employee had terminated her employment contract with effect from 1 August 2022. The employee denied this and filed interim relief proceedings claiming continued payment of salary and reinstatement. In turn, the employer claimed, among other things, payment of a penalty of EUR 10,000 for a breach of the ancillary activities clause.
Court ruling: termination not unequivocal
First, the court held that the employee had not “unequivocally” terminated her employment contract. She therefore continued to be employed after 1 August 2022, so her claims for continued payment of salary and reinstatement were granted.
Court ruling: no objective justification
The court held that there was no urgent interest for claiming penalties in interim relief proceedings for a violation of the ancillary activities clause. Nevertheless, it discussed the substance of the new statutory provision and started off by considering that this provision has “immediate effect” and thus also applies to ancillary activities clauses that took effect before 1 August 2022.
The court then found that the ancillary activities provision does not apply if the employer has an objective justification. This objective justification may also be explained retrospectively and thus need not already be stated at the time the ancillary activities ban came into effect. The court listed a number of justifications, including health and safety, protecting confidential business information, violating a legal requirement and avoiding conflicts of interest. It found that the employer did not sufficiently demonstrate that it had an objective justification for the ancillary activities clause and it therefore dismissed the employer’s claim for payment of the penalty.
Tip for employers: check your non-compete clause too
This ruling emphasises that the ancillary activities clause has lost some of its clout. As soon as there is a difference of opinion about the ancillary activities clause, the employer clearly has to demonstrate its objective justification. If it cannot, that clause will not apply.
Many non-compete clauses prohibit the employee from engaging in competitive activities “both during the employment contract and for a period of one year after its termination”. The inclusion of “during the employment contract” in a non-compete clause means, in our opinion, that this aspect falls within the scope of the new statutory provision regarding the ban on ancillary activities. Employees may therefore be able to invoke the partial nullity (or partial nullity) of the non-compete clause because it conflicts with the new ancillary activities provision. It also weakens the non-compete clause. Employers would therefore do well to take a look at their standard non-compete clauses as well.
This ruling was published on a private website under AR 2022/1051.