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Government proposes compensation for employees for all non-compete clauses

Helsinki (17.12.2020 - Heikki Jokinen) The Finnish Government proposes to amend the law to oblige employers to pay compensation to employees for all non-compete clauses in their employment contracts. Trade unions have long drawn attention to the fact that the existing law is unfair and has led to a fast and wildly growing number of such clauses.

At the moment, it is legal, under certain conditions and for a maximum of half a year, to limit an employee’s right to take a new job in the same trade or start up their own business in the same business area of their former employer.

The core of the problem is that –  for up to six months – this kind of ban costs the employer nothing. The use of non-compete clauses has been extended to many professions where there are no real grounds for it at all.

Among employees with a higher education this begins to be the norm. Akava, the Confederation of Unions for Professional and Managerial Staff has been actively demanding change for a long time now.

Vesa Vuorenkoski, Head of Political Affairs at Akava told Yle news in summer 2019 that some 60 – 65 per cent of new employment contracts for Akava members include a non-compete clause.

In November, the Government of PM Sanna Marin published its proposal to amend the law.

– Currently, non-compete agreements are widely used in Finland. Contrary to the provisions of the Employment Contracts Act, such agreements are routinely used for almost all groups of employees, regardless of whether they are key employees of the company or not, Minister of Employment Tuula Haatainen says.

The proposal says that for a non-compete period of up to six months, compensation would be equal to 40 per cent of the salary during that period. For a non-competition period longer than six months, compensation would be equal to 60 per cent of the salary for the entire non-compete period.

The maximum length for a non-compete clause would be one year, the same as now. The amendments would be effective for new agreements as of 1 January 2022. From the beginning of 2023 the law would also cover agreements made before 2022.

Akava is for the proposed change, says Akava President Sture Fjäder. He considers it as a positive step that would allow more possibilities for employees to move on to new and more challenging jobs.

STTK, the Finnish Confederation of Professionals said earlier this year that the proposal is a step in the right direction, but not bold enough. STTK stressed that the goal is to cut the number of groundless non-compete clauses. For this reason, it would be justifiable to pay a full salary to employees during the time they cannot take up a new job due to the non-compete clause.

Read more:

Trade unions want to limit fast growing use of the non-compete clause in employment contracts (29.08.2019)