Non-competition clauses
A non-competition clause is an agreement between an employee and his/her employer prohibiting the employee from carrying on business or activities of a certain kind or taking up employment with such business or activity upon termination of the employment.
The rules on non-competition clauses have been changed continuously, and latest, they were introduced into the Danish Act on restrictive employment clauses, which came into force on January 1, 2016.
A non-competition clause must be assessed on the basis of the rules being effective at the time of agreement on the clause. The time of agreement is therefore crucial to the assessment of the validity and the scope of the clause.
The current rules on non-competition clauses apply to all salaried employees, meaning that a non-competition clause may only be agreed upon with a “highly trusted” employee. Further, a wide range of terms and conditions must be met. Otherwise, the clause is not valid, which means that neither the employer nor the employee is bound by the agreement.
When is the non-competition clause valid?
It is an element of a valid contract that the employee:
- is informed in writing about the specific terms and conditions of the employment making it necessary to incorporate a non-competition clause in the contract of employment;
- has been employed with the employer during a consecutive period of at least 6 months;
- is compensated for the period during which the restrictive clause applies;
- is not bound by the clause for more than 12 months as from the date of resignation; and
- receives the relevant information in writing.
Combined clauses
If the non-competition clause is combined with a non-solicitation clause, the clauses together are called a combined clause. In order for such combined clause to be valid, it must comply with the elements of a valid contract for both a non-competition clause and a non-solicitation clause, and the period of the combined clause may never exceed a maximum of 6 months.
HjulmandKaptain has extensive experience in advising on and drafting of non-competition clauses. Please feel free to contact us, if you have any questions, or if you need assistance in connection with the drafting of a non-competition clause.
