When dealing with trade secrets, your company must protect itself during the hiring process. Many employers in the Netherlands opt to have non-disclosure agreements (NDAs) to protect confidential information.
Under the laws of the Netherlands, confidentiality is not an implicit obligation or assumed as a default in employment contracts. As an employer, it’s your responsibility to understand the risks and protect your company’s confidential information with an NDA.
But how are NDAs enforced in the Netherlands? Is it important to add a penalty clause to the non-disclosure agreement in case of a breach of contract? Learn more about complying with Dutch law and protecting your company and its global employees.
(Note: our guide is for informational purposes and isn’t intended to provide legal advice).
What is an NDA?
An NDA is a contract that legally binds one or more parties to keep proprietary or confidential information from being shared with others.
NDAs are commonly given to employees upon hiring and used in workplaces to protect trade secrets, customer data, and intellectual property from competitors. Unfortunately, some NDAs have been misused to prevent employees from speaking out about harassment or fraud as whistleblowers. Whistleblowers are covered under the Dutch Whistleblowers Authority Act in the Netherlands.
Are NDAs enforceable in the Netherlands?
Yes—NDAs are enforceable in the Netherlands.
If the confidentiality agreement has a penalty clause, the employer can immediately claim upon breach of contract. Ultimately, the civil court decides if the total penalty should be awarded. They may reduce the penalty if it is considered unreasonable. Learn more about what information can be protected under the NDA below.
You can generate NDAs, offer letters, and any other documents you need, then easily send them out for e-signature—all through Rippling.
Rippling allows you to compliantly create an NDA with every job offer in the NetherlandsSee Rippling
3 things you need to know about NDAs in the Netherlands
The Netherlands highly encourages employers to use NDAs to protect their company name and avoid leaks of confidential nature. These are three things you need to know about Dutch NDAs:
- Penalty clauses. If you are creating an NDA in the Netherlands, it is important to include penalty clauses that will incentivize both parties to comply with the contract and discourage any breaches. Under Dutch law, a penalty clause is enforceable if the contract is breached.
- Clarity around confidentiality: The NDA must explicitly say what information is confidential, what’s public domain, and what the exclusions are. All waivers must be in writing and approved by the employer.
- The time period of the NDA. Regardless of whether the employee is terminated or leaves the company, the NDA will remain valid for the period written in the non-disclosure agreement, usually about two years.
Protect your business by creating a compliant NDA for every hire you make in the Netherlands
When would an employee or contractor sign an NDA?
When hiring a Dutch employee, the employer must include the NDA within the employment contract or during onboarding after signing the offer letter. It is not a separate contract.
Frequently asked questions about NDAs in the Netherlands
Are NDAs enforceable in the Netherlands?
The Netherlands considers an NDA a legally binding contract, and Dutch law will allow the employer to claim the penalty clause immediately upon breach of contract. It’s key to stay on top of the nuances of confidentiality agreements in order to stay compliant with the laws of the Netherlands.
Are NDAs enforceable overseas?
While NDAs are enforceable within the Netherlands, the enforceability of a non-disclosure agreement (NDA) in the Netherlands overseas will depend on a few factors. As an employer, you will need to consider which country’s laws will govern the provisions of this agreement, as it may involve different governing laws. Choosing will help simplify the process when selecting a jurisdiction to enforce and handle disputes.
Enforcing an NDA overseas may also become costly with language barriers, cultural differences and a lack of local law firms to represent your interests as an employer. In the end, the NDA will be valid, but it will depend on the specific circumstances of your case.
What information must be included in an NDA in the Netherlands?
NDAs in the Netherlands must contain specific points to confirm all involved parties understand the confidentiality agreement. Here are those specific points:
- Who are the specific parties and their roles involved in the agreement.
- The purpose of the agreement: the employee entering a relationship with the employer, for example.
- What specific information must remain confidential, and what exclusions apply.
- When and if the information can be shared and how as a disclaimer (written, oral, etc).
- How long must the information remain confidential after employment ends.
- A penalty clause in case there's a breach of contract, including the consequences and fines.
What information can be covered by an NDA?
It's important to note that an NDA cannot protect information that’s already public knowledge or part of the public domain. Additionally, it's against the law for NDAs to prevent individuals from reporting criminal activity by a company, even if they signed the agreement.
- Trade secrets and proprietary information. A company can have unique manufacturing processes, formulas, designs, and technology that give them an edge over their competitors.
- Financial information including confidential financial documents such as statements, budgets, sales data, and forecasts.
- Employees' sensitive information including their salaries, job duties, personal data, and performance evaluations.
- Intellectual property including patents, trademarks, copyrights, and other types of intellectual property rights that a company owns.
- Customer data including purchasing history, demographics, and preferences, can be used for marketing strategy.
When should you use an NDA?
In the Netherlands, it’s common to use an NDA in the following situations:
- During business negotiations and partnerships when sensitive information is being discussed, including financial data, business strategies, or trade secrets.
- As part of an employment contract, when an employee is hired, they must keep certain information confidential, including proprietary technology, know-how, or business plans.
- When protecting intellectual property rights to keep all parties from sharing confidential information about inventions, designs, and other information with third parties.
- When showcasing an unreleased new product or technology to potential partners or investors.
- When disclosing sensitive financial data to investors.
Rippling makes it simple to create and send out an NDA as part of a job offer package.
Is an NDA the same as a confidentiality agreement?
Yes. Non-disclosure agreements may also be called confidentiality agreements or confidentiality statements. In Dutch, these agreements can be called Geheimhoudingsovereenkomst or Vertrouwelijkheidsovereenkomst and translate to a confidentiality agreement in English.
Is an NDA the same as a non-compete agreement?
No—a non-disclosure agreement and a non-compete agreement are not the same.
An NDA’s goal is to protect confidential information between two parties or more and puts an obligation of confidentiality on the employee. In the end, it prevents the disclosure of confidential information. In the Netherlands, the breach of this agreement can lead to penalties and fees, as stated in the penalty clause.
In contrast, a non-compete agreement limits an employee or individual from working for competitors within a specific timeframe, usually up to two years. This kind of agreement usually forbids employees or contractors from directly competing with their employer or engaging in activities that could negatively impact the employer, like using proprietary information or soliciting from current clients. It must have prior written consent from the employee, and the employee must be over 18 years old.
You cannot include a non-compete clause in a fixed-term (temporary) employment contract unless “legitimate business interests” are at stake. You must specify these business interests explicitly in the employment contract.
Usually, next to a non-compete agreement, you have a “non-solicitation agreement”, which the employer protects the client base, suppliers, and other business relations.
Similarly to the non-compete agreement, you can only include non-solicitation agreements in a permanent contract. You can only include a non-solicitation clause in a fixed-term (temporary) contract if you specify the necessity in the employment contract.
The Dutch Competition Act comes into play with non-compete agreements as it prohibits companies from abusing a dominant market position and having very small or no competitors. This act provides additional protections for employees regarding non-compete agreements in employment contracts.
Is an NDA ethical?
Yes—they are common practice in the Netherlands to protect employers from potential leaks and sharing of trade secrets and intellectual property to third parties by contractors and employees.
Make sure to stay compliant by clearly stating the details of the non-disclosure agreement, including that the receiving party (employee) agrees that the disclosure of confidential information without the express written permission of the employer (the disclosing party) will cause harm.
Benefits of NDAs in the Netherlands
NDAs can help protect employers from unexpected leaks of confidential information and intellectual property details abroad but also protect your company name and reputation in the current competitive business landscape. Benefits include:
- Your company's confidential customer data, trade secrets, and intellectual property rights, including patents, trademarks, and copyrights, can be legally protected.
- Establish confidentiality obligations with contractors, employees, and partnerships for transparency, and everyone understands what constitutes confidential information or misuse of sensitive information.
- Prevent business plans and marketing strategies that give your business the competitive edge from being shared or misused to the employer's detriment.
- If the terms of this agreement were breached, the disclosing party has clear grounds to seek damages beyond the penalty clause. The enforceability of the NDA will help pursue legal action against the person in question.
What happens if an NDA is breached?
An employee violating the confidentiality agreement can result in their termination. The confidentiality statement remains in effect even after the employee has left the company.
In the Netherlands, including penalty clauses in non-disclosure agreements is standard practice. These clauses serve as a deterrent and punishment for any breach of contract. It is important to note that the penalty clause cannot be considered excessive, or the courts will be forced to reduce it.
Unlike other countries, the severity of the penalty does not have to match the harm caused. If an employee breaches the NDA, you can pursue damages in addition to the listed penalty clause in the contract under Dutch law.
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Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.