The employer's obligation to inform about a no-hire clause

The Supreme Court has ruled on the employer's obligation to inform about the use of no-hire clauses.

Background

The case concerned a Master Agreement entered into between the companies A and B containing a clause to limit the parties' employees' possibilities of obtaining employment with the other party. In the autumn of 2004, C took over B and E, including related subsidiaries. At the time of C's acquisition of B, the employee F was employed with E's subsidiary D. After C's take over, F was transferred for employment with E.

In connection with the acquisition, C took over B's obligations under the Master Agreement, from which it appeared that the agreement covered B and any subsidiary of B – except for E and any subsidiary of E.

In the autumn of 2006, there was a lot of media coverage concerning no-hire clauses within the IT sector, and on this basis, C made an announcement on the Intranet. In this connection, F claimed that he was covered by one or more no-hire clauses in relation to the employment with D and later on with E, of which he had not been informed, and he therefore claimed compensation.

The findings of the High Court

The Court found that it had not been proved that F had been covered by the Master Agreement or any other no-hire clauses during his employment or that F had in any similar way had limited ability to obtain employment with another company.

The findings of the Supreme Court

Before the Supreme Court, F did not claim to be directly covered by the no-hire clause of the Master Agreement, but F claimed that an employer is obligated to inform an employee if he/she is covered by a no-hire clause potentially affecting the employee's job options.

The Supreme Court found that it was undisputed that the employee was not covered by the no-hire clause of the Master Agreement entered into between A and B and subsequently transferred after C's take over.

The Supreme Court further found that it had not been rendered probable that the employee had been covered by a no-hire clause entered into between B and the other companies.

It is worth noting that the Supreme Court states that it is natural to assume that, in general, section 2 (2) of the Contract of Employment Act does not apply to limitations in the employment (including no-hire clauses) that are not a consequence of the legal relationship between the employer and the employee, but are a direct consequence of the employer's legal relationship with a third party. However, the Supreme Court states at the end of the ruling that the question may be presented to the European Court of Justice as it concerns the construction of an EU directive.

The content of this Newsletter is not, and should not replace, legal advice.

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Finn Schwarz

Managing Partner