New rules on no-compete clauses on the horizon?

Back
Categories
HR News
Date:
28 May 2014

the danish government proposes in its new growth programme to tighten the rules governing post-termination restrictions - and to issue a blanket ban on no-hire agreements

By:
Morten Langer

The Danish Government proposes in its new growth programme to tighten the rules governing post-termination restrictions - and to issue a blanket ban on no-hire agreements

The Danish Government proposes in its new growth programme to tighten the rules governing post-‎termination restrictions – and to issue a blanket ban on no-hire agreements.‎
 
If an employee resigns, the employer may have an interest in ensuring that the employee does not take ‎up employment with a competitor straight away to use the know-how the employer has invested in ‎accumulating. The employer may prevent this by way of a no-compete clause because such a clause ‎prevents the employee from taking up employment with a competitor for a specified period.  A non-‎solicitation or non-dealing clause, on the other hand, may prevent an employee who resigns and takes ‎up a job with a competitor from actively approaching or dealing with his or her former customers.‎
 
If the employee is protected by the Danish Salaried Employees Act, special rules apply with regard to ‎entitlement to compensation for accepting to be bound by such restrictions.‎
 
In addition, two employers – or an employer and an employee – may agree that they will not hire each ‎other's employees or that the former employee will not hire his or her former colleagues in his or her ‎new job. ‎
 
With its Growth Programme 2014, the Danish Government has taken the initiative to drastically change ‎this regime. ‎
Specifically, it is proposed:‎
  • to have the rules governing entitlement to compensation for accepting to be bound by post-termination ‎restrictions apply to all employees, instead of only employees protected by the Danish Salaried ‎Employees Act

  • to set a maximum duration for such restrictions of 12 months, as opposed to today where there is no ‎limit

  • to make the compensation payable to the employee reflect the duration of the restriction

  • to issue a blanket ban on no-hire agreements.

 

Norrbom Vinding notes

  • that with the Government initiative, the scene has been set for a drastic limitation of the scope for ‎employers to impose post-termination restrictions on their employees to protect themselves from ‎employees who resign to take up employment with a competitor; and

  • that, moreover, extensive restrictions are proposed with regard to the access to use non-solicitation and ‎non-dealing clauses – not least in relation to the areas where such clauses have almost traditionally ‎been imposed for a longer term, e.g. in the accounting industry.‎
Norrbom Vinding will, of course, follow the initiative and report on any developments.‎