Managing Restrictive Covenants in the European Pan-Nordic Region. Tuesday, January 26, 2016

Transcription

1 Managing Restrictive Covenants in the European Pan-Nordic Region Tuesday, January 26, 2016

2 Moderator & Speaker Rasmus Christensen Plesner Denmark 2

3 HOUSEKEEPING If you lose your audio for any reason, click the phone icon just above the chat box. Please submit your questions via the Q and A box on the bottom right side of your screen and send them to all presenters to make it easier to respond. We will answer questions verbally but also in writing. If your question is not answered during the webinar, we will do our best to answer it afterwards. 3

4 Speaker - Finland Suvi Kettunen Castrén & Snellman Finland suvi.kettunen@castren.fi 4

5 Speaker - Finland Sanna Alku Castrén & Snellman Finland sanna.alku@castren.fi 5

6 Speaker - Sweden Frida Mattsson Vinge Sweden frida.mattsson@vinge.se 6

7 Speaker - Norway Lise Berntsen Kvale Norway lbe@kvale.no 7

8 HOW TO PROTECT YOUR CONFIDENTIAL INFORMATION DURING THE EMPLOYMENT? 8

9 FINLAND In Finland, the Employment Contracts Act sets forth the employee s confidentiality obligation during employment. - Chapter 3(4): During employment, the employee may not utilize or disclose to third parties the employer's trade or business secrets. The law does not define the precise meaning of trade or business secrets. The statutory confidentiality obligation does not continue after the employment, unless the employee has obtained confidential information unlawfully. It is common and advisable to conclude a non-disclosure agreement that extends the employee s confidentiality obligation also to the time after the employment. 9

10 FINLAND In Finland, the law does not restrict the use of non-disclosure agreements. - There are no statutory limitations to the scope of the employees with whom a non-disclosure agreement can be concluded with. - There are no statutory limitations to the term of the confidentiality obligation. - There are no statutory limitations to the amount of contractual penalties, but courts may adjust unreasonable penalties. - A non-disclosure clause in the employment agreement and a separate non-disclosure agreement are equally valid. 10

11 FINLAND In Finland, it is advisable to take the following issues into account when concluding non-disclosure agreements: - Term of the confidentiality obligation: Both during and after the employment without any limitations in time. - Definition of confidential information: Extensive but not exhaustive list of information that is considered confidential (e.g. all non-public financial information and information of customers, products, pricing, sales, R&D etc.). - Sanctions: Contractual penalty, typically corresponding to the employee s 6 to 12 months salary. 11

12 DENMARK No general statutory confidentiality obligation. However, part of the ordinary loyalty obligation. Trade secrets are protected in Section 19 of the Danish Marketing Practices Act. Section 19 (2) applies both during and after the employment. It is common to include a non-disclosure clause in the employment contract. 12

13 SWEDEN No statutory confidentiality obligation for employments General duty of loyalty during the employment - Scope depends on type of business, position etc. - Vs. freedom of speech (e.g. on social media) Act on the Protection of Trade Secrets (penal act) - Limited scope since it only applies to trade secrets Contractual freedom on non-disclosure agreements - Definition of confidential information important - During and after the employment - Penalty clause v1 13

14 NORWAY No statutory confidentiality obligation for employments only The Penal Act - Unlawful use of, or making known to others, trade secrets obtained during an employment/engagement - Unlawful use of drawings, descriptions, formulas, models or similar technical aids in business activity obtained during employment/ engagement - Unlawful acquirement of the above - No limitations in time Marketing Practice Act - Trade secrets and "know-how Contractual freedom on non-disclosure agreements - Information required by law to make known - Unreasonable and contrary to good business practice 14

15 WHAT TYPE OF POST- TERMINATION CLAUSES TO INCLUDE IN THE EMPLOYMENT CONTRACT? 15

16 DENMARK Post-termination Clauses Non-competition clauses Non-solicitation clauses Non-hire clauses (non-solicitation of employees) New rules coming into effect on 1 January Applicable for all employees, however, the CEO is not comprised by the new rules. 16

17 DENMARK Non-hire Clauses Non-hire clauses can no longer be agreed upon - Except in cases of transfer of undertakings; however, only for a maximum period of 6 months. Non-hire clauses agreed upon before 1 January Written agreement with the affected employees. - Compensation payable to the affected employees. 17

18 DENMARK Non-competition Clauses - Requirements Very special position of trust - Before: Special position of trust Maximum enforcement period of 12 months - Before: No maximum enforcement period At least 6 months' seniority Information on why the non-competition clause is necessary Written agreement Compensation 18

19 DENMARK Non-solicitation Clauses - Requirements Only customers with whom the employee has had business relations in the last 12 months prior to termination - Before: 18 months or customer list Maximum enforcement period of 12 months - Before: No maximum enforcement period At least 6 months' seniority Employee to be provided with a list of comprised customers in case of termination Written agreement Compensation 19

20 DENMARK Combined Non-competition and Non-solicitation Clauses Fulfillment of the before-mentioned requirements in relation to non-competition and non-solicitation clauses Maximum enforcement period of 6 months Higher compensation 20

21 DENMARK Compensation Non-competition clause or non-solicitation clause up to 6 months: - 40 per cent of the salary per month. Compensation for the first 2 months paid out as a lump sum upon expiry of the employment. Compensation reduced to 16 per cent for 3rd to 6th month if the employee finds other suitable employment. Non-competition clause or non-solicitation clause up to 12 months / combined non-competition and non-solicitation clause up to 6 months: - Compensation for the first 2 months paid out as a lump sum upon expiry of the employment. Compensation reduced to 24 per cent for 3rd to 6th month if the employee finds other suitable employment. 21

22 DENMARK Termination and non-enforceability Non-competition and non-solicitation clauses may be terminated by the employer with a notice of 1 month. Obligation to pay minimum compensation if the employment relationship ends within 6 months after the termination of the clause. If the employment relationship is terminated by the employer without the employee having provided reasonable cause for the termination, the non-competition clause is not enforceable. 22

23 SWEDEN Post-termination clauses Under the Swedish Contracts Act, covenants restricting competition must be reasonable in order to be valid. There are no other statutory regulations on post-termination clauses; the application of such clauses has been governed by a CBA from 1969, market practice and case law. A new CBA came into effect on 1 December 2015 regarding noncompetition clauses. Employees in managerial positions are exempted from the CBA. Non-solicitation clauses (employees and customers) are still governed by market practice and case law. No specific restrictions on combined non-competition and nonsolicitation clauses v1 23

24 SWEDEN v1 Non-competition clauses - Requirements For employers who handle trade secrets, and who are likely to get harmed in terms of competition if such trade secrets are disclosed. For employees who have access to, or become aware of, trade secrets and have a possibility to use such trade secrets in a way that may cause harm to the employer in terms of competition. Maximum enforcement period of 9-18 months (as a main rule). Compensation - 60 % of salary including variable parts such as bonus etc. - Deduction of income from new employment Penalty clause - Six average monthly salaries 24

25 SWEDEN Non-solicitation clauses (employees and customers) - Requirements In practice, similar requirements as for non-competition clauses but without the obligation for the employer to pay compensation v1 25

26 NORWAY Post-termination Clauses New rules came into effect 1 January Non-competition clauses - Non-solicitation clauses - Non-hire clauses (non-solicitation of employees) between the employer and a company - CEO may be exempted in a prior written agreement providing him with severance pay Non-hire clauses (non-solicitation of employees) between employer and employee - Only void if unreasonable or contrary to market practice to make applicable No restrictions on combined non-competition and nonsolicitation clauses 26

27 NORWAY Non-hire Clauses Non-hire clauses between the employer and other companies can no longer be agreed upon. - Except in transfer of undertakings - During the negotiations and up to 6 months after negotiations have been concluded without success; or - 6 months after transfer date if the employees have been informed in writing Non-hire clauses agreed upon before 1 January New laws apply from 1 January

28 NORWAY Non-competition Clauses - Requirements Particular need for protection against competition - Before: Not unduly restricts the employee's possibility to work or go further than necessary to protect against competition Maximum enforcement period of one year - Before: No statutory limitations Written agreement Compensation - Relates to G the basic amount under the National Insurance % of salary up to 8 G (currently approx. NOK ) - 70 % of salary from 8 G and upwards, possible to cap at 12 G (currently approx. NOK ) - Before: None 28

29 NORWAY Non-solicitation Clauses - Requirements Customers which the employee has been in contact with or responsible for, for the past year - Before: No limitations on the customers comprised by the restriction Maximum enforcement period of one year Before: No statutory limitations Written agreement 29

30 NORWAY Common provisions for Non-competition and Non-solicitation Clauses Written statement from the employer Must state - If and to what extent the clause will be enforced - For Non-competition clauses: why the clause is necessary (why there is a particular need for protection) - For Non-solicitation clauses: List of customers comprised During employment Upon termination Annulment of Non-competition and Non-solicitation clauses Failure to meet requirements prescribed by law Failure to provide written statement within deadlines Written termination of the non-competition clause from employer Reason for termination of employment 30

31 FINLAND Non-competition Clauses In Finland, the Employment Contracts Act restricts the use of non-competition clauses - Applies to all employees; does not apply to CEOs - Requires agreement between employer and employee Requirement for particularly weighty reason - Nature of employer s operations - Business and trade secrets - Special training given to the employee - Employee s position and duties Not valid, if no particularly weighty reason exists or employment is terminated on grounds deriving from the employer 31

32 FINLAND Non-competition Clauses In Finland, the maximum duration of non-compete obligation is 6 months - If employee is paid a reasonable compensation, may be up to 12 months Agreement on contractual penalty instead of compensation for loss is allowed - Contractual penalty may amount to employee s salary of 6 months at maximum Aforementioned restrictions on the maximum duration and amount of contractual penalty do not apply to employees in certain managerial positions; however, clauses must be reasonable 32

33 FINLAND Non-hire and Non-solicitation Clauses In Finland, no specific provisions in law - No statutory limitations to the scope of employees with whom a non-hire and non-solicitation clause can be agreed upon - No statutory limitations to the maximum duration of such restrictions and/or amount of contractual penalty, but courts may adjust unreasonable clauses - Usually, the duration is aligned with the duration of non-compete obligation (6 12 months) 33

34 HOW TO DEAL WITH SUSPICION OF INFRINGEMENT? 34

35 SWEDEN Which control measures can be taken by the employer? - correspondence - Other data - Surveillance - Routines when employments are terminated v1 35

36 SWEDEN How to discover infringements? How should an employer deal with suspicion of infringement? - Personal integrity and the right to privacy - IT forensics - Termination of employment v1 36

37 SWEDEN What actions can an employer take if confidential information is used by a competitor? - Worst case scenario - Dawn raid - Court actions v1 37

38 NORWAY Protection of personal data - EU Directive on protection of personal data (95/46/EC) The Norwegian Working Environment Act The Norwegian Marketing Control Act 38

39 DENMARK Control measures and implementation thereof. The Danish Marketing Practices Act also protects against a competitor using trade secrets. 39

40 FINLAND The Finnish privacy laws restrict the controlling and/or discovering measures that the employer can take (e.g. surveillance of employees s and other electronic data). Depending on the nature of infringement, disciplinary actions such as termination of employment or warning, are possible - A mere suspicion without actual evidence may not suffice, as the employer bears the burden of proof regarding the employee s actual misconduct 40

41 HOW AND WHEN SHOULD YOU SEEK PROTECTION AT COURT? 41

42 NORWAY Court actions Temporary precautionary measure - Stop the illegal actions from the employee/"new" employer - Written or oral process - Appeal Ordinary legal proceedings for the main claim - Action for declaration - Employee's actions are contrary to the restrictive covenants - Restrictive covenants are valid - Compensation for economic and non-economic loss - Basis of liability - Documented economic loss - Proximate cause - Liquidated damages Actions towards - The employee - The "new" employer/company recruiting customers/employees - The employee as a shareholder 42

43 FINLAND Precautionary measures - Applicant s strict liability for damages caused by unnecessary resort to precautionary measure - Usually obligation to provide security for potential damage - Legal proceedings for the main claim to be initiated within one month - The opposing party shall usually be reserved an opportunity to be heard, unless it may endanger the function of the precautionary measure Compensation for damages - Employee s liability to pay compensation for damages is somewhat restricted, especially in case of slight negligence - Due to potential difficulties in demonstrating the actual damage it is recommended to agree on contractual penalty Potential criminal sanctions for violation or misuse of business secrets 43

44 DENMARK The contract penalty may be set aside by the courts if the amount of penalty is considered unreasonably high. The courts have approved contract penalties amounting to approx. 3-6 months' salary. 44

45 SWEDEN Temporary precautionary measures - Securing evidence via dawn raids (only for IP infringements) Ordinary legal proceedings for the main claim - Under the new CBA, disputes regarding non-competition clauses shall be governed by arbitration v1 45

46 QUESTIONS? 46

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