€410,000 in fines for secondary employment: court intervenes

An employee carried out dozens of activities alongside his employment that breached his clause on secondary employment. His employer claimed over half a million euros in contractual penalties. Although the court found that the employee had breached the clause no fewer than 82 times, the penalty was ultimately significantly reduced. Where does the line lie?

Background

Since 1 August 2022, Article 7:653a of the Dutch Civil Code has provided that employers may not simply prohibit employees from engaging in secondary employment. This provision arises from the implementation of the EU Directive on Transparent and Predictable Working Conditions and aims to give employees greater freedom to undertake other work alongside their employment.

A prohibition on secondary employment is only permitted if it is supported by an objective justification. Examples include protecting confidential business information, safeguarding employees’ health and safety, and preventing conflicts of interest. This list is not exhaustive: other legitimate interests of the employer may also justify restrictions on secondary employment.

What happened?

An employee had been employed since 2020 by BouwQ, a company specializing in quality control and inspections in the construction sector. His employment contract included a clause on secondary employment that prohibited him from carrying out similar work for third parties without prior written consent.

The employee’s wife had set up her own business specializing in structural calculations and architectural consultancy. Through this business, the employee carried out work which, according to his employer, contravened the clause on secondary employment. The employer summarily dismissed the employee. This dismissal was found to be legally valid in earlier proceedings. Subsequently, in separate proceedings (ECLI:NL:RBLIM:2026:10431), the employer claimed a sum of €544,250 in contractual penalties for breaches of the clause on secondary employment.

Ruling of the subdistrict court

The subdistrict court found that the employee had breached the clause on secondary employment 82 times. Each individual assignment constituted a separate breach, as there was no connection between the assignments. By contrast, the mere registration of the company with the Chamber of Commerce did not constitute a breach. After all, the clause related to the actual performance of work and not to the carrying out of administrative acts in which the work is not actually performed. On the basis of the 82 established breaches, the employee would, in principle, have been liable for contractual penalties totaling €410,000.

The subdistrict court reduces the penalty

Under Section 7:650(6) of the Dutch Civil Code, the court may reduce a contractual penalty if it appears excessive. The subdistrict court acknowledged that serious and culpable breaches had occurred. Furthermore, the secondary activities could have jeopardized the employer’s independence and, consequently, its accreditation.

At the same time, the judge took into account that the employer had ultimately suffered no direct loss and that the accreditation had not been lost. The amount of the penalty was disproportionate to the profits of the spouse’s business. Furthermore, it had not been established that the employee had deliberately intended to cause harm to his employer. However, payment of the full penalty would lead to significant financial difficulties for the employee. The subdistrict court emphasized that a contractual penalty may serve as a sufficient deterrent, but is not intended as a revenue-generating mechanism. The penalty was therefore reduced to €40,000.

What does this mean for employers?

This ruling highlights that a breach of a secondary employment clause can have significant financial consequences for an employee, provided that the clause has been validly agreed upon and is objectively justified. At the same time, including a high penalty amount in an employment contract does not mean that this amount can actually be collected in full in the event of a breach. Factors such as the seriousness of the breach, the actual loss suffered, the benefit to the employee and their financial circumstances all play a role in assessing the level of the penalty. It is therefore important for employers not only to include a carefully worded clause on secondary employment and penalties, but also to take into account the proportionality of the sanctions.