In a recent judgment (AD 2015:8), the Swedish Labour Court (the "Court") ruled on the enforceability of a non-compete clause (the "Clause") in an agreement between an accountant and his former employer, a large accounting firm. The case concerned an accountant who left his job and begun working for a competitor, taking approximately 80 of the employer's customers with him.
According to the Court's interpretation of the Clause, the Clause stipulated that, during a two year period after the termination of employment, the accountant would have to pay 35% of all fees that he (or his new employer) received for the accountant's work for the customers and that, based on the fees paid by the customers, the accountant was required to pay approximately SEK 475,000 to his former employer. The accountant argued, inter alia, that the Clause was unreasonably onerous and thus not enforceable under Section 38 of the Swedish Contracts Act (Sw: Avtalslagen).
Following established case-law, the Court considered whether the Clause was reasonable, taking into consideration all factors relevant in the case. The Court held that the purpose of the Clause was to protect the employer's existing customer relationships, which is a legitimate interest, but nonetheless found that the Clause was unreasonable and, thus, unenforceable. The Court noted that, given the size of the compensation to be paid to the former employer and the fact that the accountant worked for a long time within a limited geographical area and that the customers in question were situated within this geographical area, the accountant was more than marginally restricted from exercising his profession by the Clause. The Court also emphasized that the accountant did not receive any compensation during the restricted period, and that his salary and other benefits during his term of employment had not been determined with regard to the restricted period.
The ruling emphasizes the Court's restrictive view on post-termination restrictive covenants. If an employee is more than marginally restricted in exercising his or her profession after the termination of employment, he or she must most likely be monetarily compensated during the restricted period in order for the restrictive covenant not to be considered unreasonable. Furthermore, it is important to note, as the case shows, that it is not only outright prohibitions on competing post termination that may be considered unreasonable – the Clause, after all, did not prohibit the employee from competing, it only "put a price tag" on his solicitation of the employer's customers. Given the circumstances in the case, this was sufficient for the former employee to be considered "more than marginally restricted" in the exercise of his profession.
Comments on the case from a Finnish perspective:
It is likely that the Clause would have been interpreted as an indirect non-compete obligation also in Finland and the restrictions regarding such clauses would have applied. Finnish legislation on post-employment non-compete obligations differs from Swedish legislation e.g. with regard to the obligation to pay monetary compensation during the restricted period. Generally, there is no obligation to pay such compensation in Finland. It is only in the case of ordinary (i.e. non-management) employees subject to a non-compete obligation exceeding six (6) months that the employee must be reasonably compensated for the restriction. Further, a non-compete obligation that applies for more than twelve (12) months will not be enforceable against these employees