- 28 May 2014
- 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.