Dealings with former customers

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Date:
19 Mar 2013

a non-competition and non-solicitation of customers clause did not fall within the scope of the danish salaried employees act as the clause had been agreed between two businesses

By:
Søren Eeg Hansen

A non-competition and non-solicitation of customers clause did not fall within the scope of the Danish Salaried Employees Act as the clause had been agreed between two businesses

A non-competition and non-solicitation of customers clause did not fall within the scope of the Danish ‎Salaried Employees Act as the clause had been agreed between two businesses.‎
 
When non-competition and non-solicitation clauses are entered into between two or more businesses, ‎the provisions of the Danish Contracts Act apply and, if the clauses are entered into in the course of an ‎employment relationship, the special provisions of the Danish Salaried Employees Act will also apply. ‎But what happens when a co-operation between two parties is no longer based on an employment ‎contract but on a franchise agreement? This question was recently considered by the Danish Eastern ‎High Court.‎
 
The case concerned a business which repaired car dents. In 2004, its employees went from being ‎employees to being franchisees, and in that connection their non-competition and non-solicitation ‎clauses were amended, among other things so as to apply for a longer period of time.‎
 
In 2009, one of the franchisees terminated the agreement and then became subject to a non-‎competition and non-solicitation clause for a period of 24 months. However, the franchisor found out ‎that the former franchisee was still servicing the franchisor's customers using the technique which ‎formed part of the franchise agreement. He therefore turned to the enforcement court, which granted ‎an interim injunction to prohibit the former franchisee from contacting or dealing with a number of ‎specified customers.‎
 
The Salaried Employees Act did not apply
During the subsequent trial on the merits, the franchisee argued that the clauses fell within the scope of ‎the special provisions of the Danish Salaried Employees Act. But neither the district court nor the Danish ‎Eastern High Court accepted the franchisee's argumentation. The clauses had been entered into ‎between two businesses and therefore did not fall within the provisions of the Danish Salaried ‎Employees Act.‎
 
Nor was there any basis for setting aside the clauses under s. 36 of the Danish Contracts Act.‎

 

Norrbom Vinding notes

  • that the judgment illustrates that non-competition and non-solicitation clauses in franchise ‎agreements will not be deemed to fall within the requirements of ss. 18 and 18a of the Danish ‎Salaried Employees Act just because the franchisee is a former employee.‎