New rules on protective covenants in the Working Environment Act

Are you aware that competition clauses must be adapted to the new rules in the Working Environment Act before 31 December 2016?

Are you aware that competition clauses must be adapted to the new rules in the Working Environment Act before 31 December 2016?

The Working Environment Act; Act of 17 June 2005 No. 62 relating to working environment, working hours and employment protection, etc. as subsequently amended, last by Act of 18. December 2015 No. 104.

From 1 January 2016, new rules on non-competition and non-solicitation (customer clauses etc.) came into force in Norway through an amendment in the Working Environment Act (new section 14 A).

The most important changes stated

  • Entitlement to full compensation in the prohibition period (including bonus etc.)
  • Maximum time frame of 12 months for prohibition of competition and non-solicitation of customers
  • Requirement of a written statement within specific deadlines for competition and customer clauses. Failure to provide or an inadequate statement results in invalidity.
  • Customer Clauses are only applicable for customers an employee have been in contact with or responsible for during the past 12 months
  • The clauses must be entered into in writing to be valid

The new rules have applied from 1 January 2016 for new contracts entered into thereafter. Restrictive covenants agreed before this date, employers are given the deadline of 31 December 2016 to make adjustments in order to fulfil the requirement according to the to the new rules.

What does this mean for the existing competition and non-solicit clauses that do not meet the statutory requirements? What should you do at first?

Review and replace existing agreements on restrictive covenants by new and adjusted agreements in accordance with the new legislation and to be signed by both the employer and employee

  1. Examine whether any non-competition or non-solicitation clauses in force today that will continue into 2017 and implement necessary adjustment to these
  2. Introduce standard clauses for use in new contracts
  3. Establish adequate routines for the duty to provide written statements within the deadlines and with the content necessary

At the outset the new legislation is more favourable to the employee. Cases where a consent for adjustment is challenging to obtain must be dealt with separately. Within certain limits (agreed benefits for employees, limitation in competition clauses etc.), changes may be imposed unilaterally by the employer.

Advokatfirmaet Haavind has extensive experience in the subject matter, and regularly advices a broad range of clients nationally and internationally in the handling of restrictive covenants. We are happy to assist your business in this forthcoming adaption process.

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