Non-compete clause in a freelance agreement: a different legal test than in employment law

Non-compete clause for freelancers: is it even allowed?

The non-compete clause is a familiar concept in employment law. For employees, strict statutory requirements apply: the clause must be agreed in writing, and the court must carefully weigh the respective interests of employer and employee when assessing its validity.

But what if there is no employment contract, but rather a freelance services agreement with a self-employed person or their personal company? Do the same rules apply? And when can a court set aside such a clause?

The Rotterdam District Court gave a clear answer on 16 April 2024 in summary proceedings between a client in the steel industry and a former management contractor (ECLI:NL:RBROT:2024:3537).

The facts: from employee to freelancer, but the non-compete clause remains

The case begins in 2014: a manager joins a subsidiary of Capitol Steel Technologies B.V. (CST), a company trading in stainless steel products. Seven years later, on 1 January 2021, the employment relationship is converted. The manager now works through his personal company, Witsand CAF B.V., under a management agreement. That agreement includes a non-compete and non-solicitation clause that is binding on both Witsand and the manager personally.

At the end of 2023, the manager announces his departure: he wants to join Buhlmann Netherlands B.V. as sales director — part of the Buhlmann Group, also active in the steel industry. CST objects: the Buhlmann Group is a direct competitor and the non-compete clause prohibits the move.

The matter ends up before the interim relief judge.

The legal framework: what applies to a contractor?

The crucial point in this judgment is the legal test that the court applies.

In an employment relationship, the court has the power under Article 7:653 of the Dutch Civil Code (DCC) to annul a non-compete clause or limit its effect if the employee is unreasonably disadvantaged in relation to the employer's legitimate interest. The court carefully weighs both parties' interests.

In a freelance services agreement, that specific employment law protection does not apply. The parties are assumed to be commercially equal. A non-compete clause in a services agreement is valid in itself. The court can only set it aside if enforcement is unacceptable by standards of reasonableness and fairness (Article 6:248(2) DCC). This is a high threshold: only in exceptional circumstances can the court intervene.

Is Buhlmann a direct competitor?

Witsand argued that Buhlmann NL is not a direct competitor of CST, because Buhlmann NL exclusively supplies products to other companies within the Buhlmann Group — and therefore does not itself sell on the external market.

The court does not accept this argument. When assessing whether activities fall within the scope of the non-compete clause, the activities of the entire group must also be considered. The Buhlmann Group as a whole operates in the same sector and trades in comparable products to CST. Once the manager starts working at Buhlmann NL, his commercially sensitive knowledge and contacts could indirectly benefit the Buhlmann Group's competing activities. The court concludes: the intended move falls within the scope of the non-compete clause.

Is enforcement unacceptable by standards of reasonableness and fairness?

Witsand also tried to set aside the clause on another ground: enforcement would be unacceptable by standards of reasonableness and fairness because of CST's conduct.

Three arguments were raised:

1. The activities do not threaten CST's market position. Witsand argued that the new role would not harm CST's interests. The court rejects this: a non-compete clause is specifically designed to prevent commercially sensitive knowledge from reaching a competitor. Since the manager built up precisely such knowledge in his previous role, the clause applies exactly to this scenario.

2. CST made negative statements about the manager to third parties. This argument also fails: there is no conduct so seriously culpable that enforcement of the clause becomes unacceptable.

3. CST failed to pay the management fee on time. The same conclusion: this does not constitute a circumstance that justifies setting aside the clause.

The court dismisses all of Witsand's claims. The non-compete clause remains in force.

What does this mean in practice?

As a freelancer or management company:

• A non-compete clause in a services agreement is legally valid and can genuinely bind you, even after the collaboration ends.
• The employment law protection of Article 7:653 DCC does not apply to you. You cannot simply request an interest-balancing exercise.
• Only if enforcement is unacceptable by standards of reasonableness and fairness do you have a chance — and that bar is high.
• Considering a new assignment? Read your non-compete clause carefully, including the definition of 'competitor'. Group structures are taken into account in the assessment.

As a client:

• A well-drafted non-compete clause in a management agreement provides solid protection, even when a contractor wishes to move to a competitor.
• The burden of proof on the contractor to have the clause set aside is considerable.
• Ensure the clause is signed both by the company and by the individual personally — as was the case here.

Watch out when converting employment to freelance: In this case, the manager had been an employee for years before becoming a freelancer. The protection he enjoyed as an employee fell away upon conversion. That is a deliberate choice that commercially mature parties can make — but as a contractor, you must understand what you are giving up.

Conclusion

A non-compete clause in a freelance services agreement is valid and can be strictly enforced. When assessing a services agreement, the court does not apply the employment law interest-balancing test, but only the standard of reasonableness and fairness. That is a high threshold. Anyone working as a freelancer or through a management company would do well to take a non-compete clause seriously from the outset — and seek legal advice before signing if necessary.

Ruling

This blog post is based on ECLI:NL:RBROT:2024:3537, judgment in summary proceedings of the Rotterdam District Court of 16 April 2024.