As expected, the bill for a new act on restrictive employment covenants was adopted by Parliament on December 10 2015.
The bill was introduced by Jørn Neergaard Larsen, the minister of employment, and is essentially a resubmission of Bill 196 on restrictive employment covenants which was submitted in April 2015 and repealed following the calling of a general election (for further details please see "No new act on restrictive employment covenants this time around").
The aim of the bill is to limit the use of restrictive covenants in order to allow employees to change jobs and make use of their expertise and qualifications with a new employer. Thus, the new rules will apply to all employment relationships that involve restrictive covenants, including with regard to managing directors.
The bill still allows companies to protect their business secrets by means of non-solicitation and non-competition clauses, but tightens the conditions for the use of such clauses. These clauses cannot be enforced until an employee has completed six months of employment and their duration cannot exceed one year after the end of an employment relationship. The rules regarding payment of compensation have also been modified to motivate companies to choose restrictive covenants of short duration and limit their use on the whole.
Further, the bill prohibits new agreements with non-hire clauses, while existing non-hire clauses will become invalid after a five-year transition period, counted from the act's entry into force. However, the bill allows these new rules to be deviated from by collective agreement and existing rules on restrictive employment covenants based on collective agreements to remain in force.
The bill will be effective for agreements on restrictive covenants entered into as of January 1 2016 or later. The new rules will not apply to non-solicitation and non-competition clauses executed before this date; such clauses are governed by the rules applicable to date.
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