top of page
Ouderwetse bibliotheek

The employer's application of non-compete clauses

What you as an employer must think about before you introduce a non-compete clause in your employee's employment contract.

Your employees have a far-reaching duty of loyalty to you as an employer. The purpose of a non-compete clause is to extend the duty of loyalty for a certain period of time in order to protect you from your employees impose on the information and knowledge they received during their employment. The employee may thus not compete with the employer after the employment has ended.

If you are bound by a collective agreement, the non-compete clause in the collective agreement is normally applied. In cases where your business is not bound by a collective agreement, a non-compete clause can be included in an employment contract. You as an employer should then consider whether the non-compete clause is needed or not.

What is covered by a non-compete clause?

The three prohibitions that usually appear from a competition are that the employee is prohibited from taking employment with another competing business within the same business area. The employee is also prohibited from being a partner in a business or assisting one with advice. In addition, the employee is prohibited from starting or running a business that competes with the employer's business.

The non-compete clause must be fair

For a non-compete clause to be valid at all, it must be reasonably fair. What is fair depends partly on the circumstances of the individual case, and partly on whether there are trade secrets in the employer's operations. Key people in a business can be covered by a non-compete clause if they possess specific information that constitutes trade secrets.

Restrictions in the clause

The restrictions in the non-compete clause shall not restrict the employee's right to use the labor market to a greater extent than is reasonable. In order for a non-compete clause to be considered reasonable, you as an employer can, for example, restrict the clause by stating which competing companies the employee may not take employment with. You can also restrict the clause to apply to a specific geographical area or a specific time after

termination of employment. The binding period is normally nine months after the termination of employment, but can in some cases extend to 18 months. In exceptional cases, the time can be extended further.


Compensation shall always be paid if the non-compete clause limits the employee's opportunities to engage in professional activities. If the clause does not provide the employee with any compensation, it is in principle excessive. The compensation normally amounts to 60 percent of the employees salary or consist of other employment benefits. The compensation must be related to the restrictions that the clause entails for the employee.

Compensation for damage to the employer

If your former employee violates the non-compete clause, you can file a claim for damages, so-called penalty payments. The penalty amount normally amounts to 3-6 monthly salaries. If the person does not cease the competing business, you can also demand a recurring fine. The fine can then be set at a certain amount that can run over as the competition progresses.

Before the employment is entered

It is important that you as an employer explain to the employee what the purpose of the non-compete clause is, what it covers and how the employee is compensated. This should be done to avoid future misunderstandings or misinterpretations of the clause. Non-compete clauses that are considered unfair can be declared invalid or adjusted in court.


bottom of page