Non-compete breach: €1.025m in penalties for three ex-employees

Three employees who secretly set up a competing business and took their employer’s confidential documents with them were ordered to pay contractual fines totalling €1,025,000. The subdistrict court (kantonrechter) of the District Court of Zeeland-West-Brabant, sitting in Breda, did reduce the fines considerably, because the employer had hardly substantiated its actual loss (13 May 2026, ECLI:NL:RBZWB:2026:5158).

The ruling shows how far a penalty clause reaches, when a court reduces it under Article 6:94 of the Dutch Civil Code (BW), and how a new business can be held liable alongside its founders. Below we set out the facts, the reasoning and a checklist for employers and employees.

What happened in this case?

The employer lays subsea power cables for offshore wind farms. Three employees prepared a competing business while still employed and used the employer’s documents to win tenders.

It is a highly specialised market with only a handful of players worldwide and cable-laying vessels that cannot be used for anything else. The employer owned one such vessel and acquired a second in 2022, partly with a view to the growing American market.

The three employees were a project manager, a tender engineer and a tender coordinator. Each employment contract contained a non-compete clause (concurrentiebeding), an ancillary-activities clause (nevenwerkzaamhedenbeding), a confidentiality clause, a company-property clause and a penalty clause. The penalty clause provided for a fine of €25,000 per breach plus €2,500 for each day the breach continued, without a maximum.

The tender engineer left on 1 August 2022, the tender coordinator on 1 August 2023 and the project manager on 1 October 2023. Through their roles, all three had access to commercially and technically sensitive information: the pricing structure of tenders, working procedures, investment plans and project documentation.

How did they prepare the competing business?

As early as 2021, the project manager and the tender engineer held regular online meetings about their new business. In April 2022 they incorporated a company in the United States and set up a website offering the same services as their employer.

They approached ship designers from their work email addresses, invited the employer’s business contacts to meetings at the employer’s expense and approached investors while presenting themselves as representatives of their then employer. Shortly before leaving, the tender engineer suggested in a chat message that his colleague should carefully take documentation, such as method statements and procedures, that could be useful to them. The project manager replied that he was already on it.

The project manager then downloaded confidential documents to his personal Dropbox account, including the complete investment plan for the new cable-laying vessel. That document contained technical specifications, market analyses and financial details.

The tender coordinator was engaged by her former colleagues to prepare a tender for the new business for a wind farm operator. It was the same tender she was working on for her employer at that time. The day after his employment ended, the project manager appeared at an offshore trade fair in the United States on behalf of the new business.

What did the forensic investigation show?

The employer engaged a digital forensic investigator to examine the returned laptops and accounts. The investigation found a very large number of digital traces relating to the preparation and start-up of the competing business.

The new business had copied passages from the employer’s documents word for word into its own tenders. The employer’s documents had also been used as a reference for pricing. Chat messages, cloud storage logs and meeting notes later proved decisive in court.

How did the court assess the competition defence?

The court held that the new business was a competitor, even though it had no vessel or paying clients yet. It had registered for the same tenders as the employer, both inside and outside the United States.

The former employees argued that their company was only an idea and was aimed at the American market, which they said was closed to foreign cable layers under the Jones Act, the US law that reserves certain domestic shipping to US vessels. The court rejected that argument: cable laying falls outside the Jones Act, so foreign cable-laying vessels may operate in American waters. The fact that the new business did not yet have a vessel in service did not mean there was no competition.

Had the employer waited too long?

No. The former employees argued that the employer had lost its rights by waiting too long (rechtsverwerking). The court stressed that the mere passage of time is not enough; there must be special circumstances that gave the employees a justified expectation that the employer would not enforce its rights.

On 6 February 2024 the employer had written to the two men and expressly stated that it would enforce the contractual clauses, including the penalty clause. That was sufficient. There was no ground for a justified expectation that the claim would not be pursued.

Did an oral assurance from HR help?

No. The employees said an HR officer had told them the non-compete clause was only a formality and would not be enforced. The employer disputed this, and the employees could not prove it, so the court rejected the defence.

Which clauses did the employees breach?

The court found that the project manager and the tender engineer breached the non-compete clause, the ancillary-activities clause, the confidentiality clause, the company-property clause and the employer’s code of ethics. The tender coordinator breached the confidentiality and company-property clauses by copying business documents.

According to the ruling as we read it, the breaches of the non-compete and ancillary-activities clauses were treated as one, because a reasonable interpretation of the contract means the same conduct should not be fined twice. The court placed the start of the competing activity at the moment the new business’s website went online in June 2023. From then on, it was no longer mere preparation but economic activity.

The tender coordinator had on two occasions copied her employer’s business documents almost word for word into material for the new business, including a local content plan and a hazard identification and risk assessment document.

Why did the court reduce the fines?

Because the fines, calculated under the contract, ran into millions of euros per person and bore no relation to the loss the employer had shown. Under Article 6:94 of the Dutch Civil Code (BW), the court may reduce a contractual penalty if fairness manifestly requires it.

The court took several factors into account. The employer had substantiated only a limited loss, of around €55,000. The penalty clause had no maximum. And the fines were out of all proportion to the salaries of the employees.

Other factors pointed the other way. The breaches were committed knowingly and deliberately, systematically and over several years, using confidential material for the employees’ own commercial gain. The former employees had also not been open about their income from the new business.

The result: the project manager and the tender engineer were each ordered to pay €500,000, and the tender coordinator €25,000.

Was the new business itself liable?

Yes. The court held the new business liable for the loss the employer suffered, to be assessed in separate follow-up proceedings for the assessment of damages (schadestaatprocedure).

The new business was not a party to the employment contracts. However, it knew about the breaches, because it was set up and run by the same former employees, and it benefited from them directly. Knowingly profiting from someone else’s breach of contract can be a wrongful act (onrechtmatige daad) under Article 6:162 BW.

Which orders and prohibitions did the court impose?

In addition to the fines, the court prohibited any further use of the confidential information and ordered all the documents concerned to be destroyed. It also barred the new business from taking part in the specific tenders for which it had already registered.

The court refused a broader ban on registering for any comparable tenders until 2032. That would in effect have shut down the business and went too far as a restriction on the freedom to conduct a business. The employer’s request for a rectification on the website and in letters to clients was also refused: with the tender ban in place, the court saw no remaining interest in it.

Compare a case in which no non-compete clause had been agreed. On 4 August 2026, the subdistrict court in Amsterdam found that a joint move by nine colleagues was not solicitation and awarded a single penalty of €25,000 for one email to a client. What was agreed in writing makes a large difference.

What should you check as an employer?

The fines were reduced mainly because the loss was poorly substantiated and the clause had no cap. Prepare for enforcement before a dispute arises.

• Are the non-compete, confidentiality and company-property clauses agreed in writing, and for a fixed-term contract, is the non-compete clause justified in writing (Article 7:653 BW)?
• Does the penalty clause contain a maximum, so the amount is easier to defend as proportionate?
• Have you sent a written notice that you will enforce the clauses as soon as you suspect a breach, to prevent a defence of waiver (rechtsverwerking)?
• Have you documented your loss: lost tenders, margins, investigation costs and the value of the information taken?
• Do employees know in advance that company laptops and accounts may be examined, so a targeted forensic investigation respects the GDPR?
• Have you considered an attachment of evidence (bewijsbeslag) if relevant material is in the other party’s hands?

What should you check as an employee?

If you plan to start your own business, the preparation itself can already breach your contract. Check your position before you resign.

• Does your contract contain a non-compete or ancillary-activities clause (Article 7:653a BW), and how long and how wide is it?
• Is an assurance that the clause is “only a formality” confirmed in writing? An oral statement was not enough in this case.
• Have you returned all company property and kept no copies in private cloud accounts?
• Do you prepare your business without your employer’s documents, email addresses, working hours or contacts?
• Is the clause unreasonably burdensome? Then ask the subdistrict court to annul or suspend it before you start, not afterwards.

What can we do for you with a non-compete clause?

Our employment lawyers advise employers and employees on non-compete clauses, confidentiality and enforcement, as part of our work in Dutch employment law.

• We review your non-compete, confidentiality and penalty clauses and redraft them with a cap.
• We draft the written notice to enforce the clauses, or the response to such a notice.
• We calculate the penalties forfeited and the loss you can substantiate.
• We request an attachment of evidence or a forensic examination of company equipment.
• We conduct interim relief proceedings (kort geding) to enforce, suspend or annul a clause.

Summary

• Three former employees were ordered to pay €1,025,000 in total for breaching non-compete, ancillary-activities, confidentiality and company-property clauses (ECLI:NL:RBZWB:2026:5158).
• The court reduced the fines under Article 6:94 BW, mainly because the employer had substantiated only a limited loss and the clause had no cap.
• The new business was held liable in tort under Article 6:162 BW for knowingly profiting from the breaches; damages will be assessed separately.
• A ban on all comparable tenders until 2032 and a rectification were refused as going too far.
• Employers should enforce promptly in writing and document their loss; employees should never use company documents for a new venture.

Frequently asked questions