Employment contract: 8 clauses that should be included

What may or may not be included in an employment contract, what do the various provisions mean and what do you have to bear in mind?

Under Dutch law, the employer can in principle determine, in consultation with his employees, what is included in the employment contract. However, the law imposes a number of requirements on certain clauses. Which clauses are useful in an employment contract, what do they imply and what do you have to look out for? This article discusses various clauses that may be included in an employment contract, namely,

• Probationary period clause
• Non-compete clause
• Non-solicitation clause
• Ancillary activities clause
• Changes clause
• Incorporation clause
• Confidentiality clause, and
• Penalty clause

Probationary period clause

Upon entering into an employment contract, employer and employee can agree upon a period within which both parties can terminate the contract with immediate effect at any time: the probationary period. However, it is not allowed to include a probationary period clause in a fixed-term employment contract for a period shorter than six months. If an employment contract is entered into for a period exceeding six months, it may be agreed upon a maximum probationary period of one month. A maximum probationary period of two months may be included in employments contracts for an indefinite period. A probationary period does only apply if it (1) has been agreed upon in writing and (2) is the same for both parties.

Non-compete clause

A non-compete clause (temporarily) limits the freedom of an employee to work elsewhere in a particular manner after his employment has ended. This way, the employee can be prevented temporarily to work for a competitor and, by doing so, cause harm to your company. In principle, a non-compete clause in an employment contract for a definite period is not valid, unless adequate grounds for the substantial business interests requiring a non-compete clause will be given in writing. Furthermore, a non-compete clause must be agreed upon in writing and it can only be agreed upon with an adult employee. The clause must specify, inter alia, its duration and geographical scope.

Non-solicitation clause

A non-solicitation clause is a particular kind of non-compete clause, temporarily prohibiting the employee from working for business associates of the former employer, such as customers. The non-solicitation clause can also prohibit maintaining contact with clients and business associates of the employer. Just like a non-compete clause, a non-solicitation clause is only valid in employment contracts for a definite period when the obligation to give adequate grounds has been fulfilled.

Ancillary activities clause

An ancillary activities clause usually means that the employee is not allowed to perform other work than for his employer, unless he has received approval to do so. The prohibition of other paid activities is limited to the duration of the employment contract. An ancillary activities clause may prevent that an employee performs competitive work or that he will get overburdened by having several jobs. From 1 August 2022, a prohibition to perform ancillary activities will only be valid if it can be justified on the basis of objective grounds.

Changes clause

If an employment contract contains a changes clause in writing, it may be a little easier for the employer to unilaterally change the employment conditions of the employee. Employees are protected by employment law, so, in principle, the terms and conditions of employment can only be changed with the consent of the employee. However, if a unilateral changes clause has been agreed upon and the employer has a substantial interest, the employee’s interest in maintaining his terms and conditions of employment may sometimes have to give way.

Incorporation clause

The incorporation clause is a clause in the employment contract in which a collective labour agreement and/or personnel handbook containing employment conditions and internal regulations will be declared applicable. The employee and employer are hence required to adhere to the collective labour agreement and/or personnel handbook – with the terms and conditions agreed therein.

Confidentiality clause

When performing their work, employees will get familiar with confidential information of the employer or business relations. To provide that employees will treat this kind of information carefully, a confidentiality clause can be included in the employment contract. A confidentiality clause determines that the employee will observe secrecy towards confidential information, both during and after the employment.

Penalty clause

The employment contract may include that the employee owes a penalty if he violates the agreed-upon conditions. It may be determined that an employee who breaches the confidentiality obligation has to pay a certain amount in penalties for each violation. The amount of the penalty can be by reduced by the judge.

More information

Would you like to get more information on employment contracts? Do you need assistance in drawing up and assessing a contract? Would you like to know whether a situation is in violation of the agreed conditions of employment? Please contact Russell Advocaten. We are dedicated to helping you!