This content is from: Local Insights

Denmark

Introduction of a bill on alteration of non-competition and non-solicitation clauses

The Danish minister of labour has substantiated the introduction of a new bill with a wish to encourage the mobility of the labour market. According to the bill it will become financially more onerous on the employer to impose both non-competition clauses and non-solicitation clauses on the employee.

From the termination and as long as a non-competition clause is valid, a former employer must pay monthly compensation amounting to 50% of the salary paid at the time of termination. However, the employer has a right of termination/setting-off though setting-off can only take place if the employee takes up new and relevant employment, meaning employment within their natural professional branch.

The bill will bring non-solicitation clauses into compliance with the already existing provision regarding non-competition clauses. The former employer must pay a monthly compensation of 50% of the salary paid at the time of termination. However, the compensation is only due to be paid from the second year after termination. This means that the first year is free of charge for the employer. The employer has a right of termination/setting-off but contrary to non-competition clauses, setting-off can only take place, reducing the compensation to half during the relevant months (thus reduction amounts to 25% of the salary paid at the time of termination).

According to the bill, the law will not be applicable to employment contracts entered into before the commencement of the law. If a contract is entered into (signed) before the commencement of the law, and the employee starts working after the commencement of the law, the new provisions will not apply.

At present, the Danish Industrial Relations Committee is preparing a report and the second reading of the bill will take place on April 22 in the Danish Parliament. Taking into consideration the controversial substance of the bill it is expected that amendments will be put forward during the second reading. The bill will therefore apparently not be passed in its present form and is not expected to come into force until June 1 1999 at the earliest.

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