The previous government submitted a bill on 29 April 2015 concerning the use of restrictive covenants in employment law. Due to the election in June 2015 however, the bill was rejected. The same bill with some updates has now been resubmitted by the new government on 7 October 2015 by the Minister for Employment, Jørn Neergaard Larsen, and has been added to the parliament's agenda for the 30 October 2015.
With the agreement on a growth package in June 2015, it was decided to limit the use of restrictive covenants. The reason for this is that it is considered beneficial to society's growth and productivity when employees can easily change jobs and use their knowledge from other companies.
The resubmitted bill essentially means that the rules on restrictive covenants (non-competition and non-solicitation clauses) must be equal for all employees, and therefore not only aimed at salaried employees as until now. Furthermore, there will be a limitation in the duration of a restrictive covenant as the new rules limit duration to a maximum of 12 months. Finally, all employees who are bound by a restrictive covenant after their employment will be eligible for compensation of 16 to 60 % of their salary depending on the specific situation.
The Act on Employers’ Use of No-Hire Clauses will be withdrawn and under the new law it will be forbidden to enter into no-hire clauses unless it is a part of a company transfer. In such cases the Act on Employers’ Use of No-Hire Clauses can last a maximum of 6 months. Existing agreements on no-hire clauses will be invalid after a transitional period of 5 years from the commencement of the Act.
You can read our earlier newsletter where the former bill was reviewed here. The resubmitted bill has, with exception of a single amendment, the same contents as the earlier submitted bill.
If the bill is adopted, the new rules will be enforced as of 1 January 2016 and apply to all new clauses applied to employees after that date. For clauses already in force, the new rules will continue to apply, just like the rules on clauses in collective agreements can maintain the agreement period.
Bird & Bird's comments
Please note that at present we are only discussing a bill, modifications may occur in the consideration of the bill.
The new rules shall only apply for future employment agreements; therefore existing employment agreements containing restrictive covenants will continue to be valid.