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A no-hire clause is a material term of employment

February 2009 - Employment. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

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Must a no-hire clause be mentioned in the statement of employment particulars? The Maritime and Commercial Court says ‚Äėyes‚Äô and awards DKK 75 000 in compensation

Judgment by the Maritime and Commercial Court

Karsten Holt
kho@norrbomvinding.com

Must a no-hire clause be mentioned in the statement of employment particulars? The Maritime and Commercial Court says ‚Äėyes' and awards DKK 75 000 in compensation.

An employee was awarded about 6 weeks' compensation under the Danish Statement of Employment Particulars Act for a no-hire clause which was not mentioned in her statement of particulars and which prevented her from obtaining employment with a company where she had worked on secondment.

In May 2006, a parent company of the employer agreed with one of its customers that the customer was not allowed to hire any employees on secondment from the parent or its subsidiary. In early 2007, a female employee was seconded to the customer from the subsidiary. After a couple of months, the employee and the customer began to discuss the possibilities of employment, but then the parties became aware of the no-hire clause. The customer therefore informed her that she would not be offered employment.

In the Maritime and Commercial Court the employee made two submissions: first of all, that the no-hire clause was invalid as it was an attempt to bypass the provisions of the Danish Salaried Employees Act on non-solicitation clauses. Secondly, she was entitled to compensation under the Danish Statement of Employment Particulars Act as a no-hire clause is a material term of employment within the meaning of that Act, which means that she should have been informed of its existence. Her former employer disputed the invalidity claim and also argued that the no-hire clause was not a material term of employment, but a usual one in those types of job, which the employee disputed.

The Maritime and Commercial Court held that the no-hire clause was valid and enforceable, taking particularly into account the prevalence of no-hire clauses in occupations where employees are seconded and also the creditability of the considerations and objective behind the no-hire clause, ie preventing employees from taking up employment with customers. On the question of whether a no-hire clause is a material term of employment, the Court found that no-hire clauses deprive employees of their right to seek other employment. For that reason, a no-hire clause is a material term of employment and the employee must therefore be informed of its existence on employment or when the clause is triggered during the employment. Accordingly, the Court awarded the employee DKK 75 000 in compensation, amounting to approx. 6 weeks' pay, but without saying anything about how that amount was reached.

Norrbom Vinding notes: 

  • that the case shows that a no-hire clause will usually be a material term of employment within the meaning of the Danish Statement of Employment Particulars Act, which means that the employee must be informed in writing of its existence; and
  • that the award is remarkably high given that recent High Court case law, also after the amendment in 2007 of the Danish Statement of Employment Particulars Act, has kept the award level of DKK 5 000 or 10 000 set by the Danish Supreme Court in 1997.

This information does not constitute legal advice and should not be relied upon as such

For more information please visit www.norrbomvinding.com