Legal Alert – Post-Employment Non-Competition Restrictions May Apply Abroad

Back in 2016, the Court of Appeal of Eastern Finland issued a decision regarding the applicability and extent of the post-employment non-competition clause under Chapter 3, section 5 of the Finnish Employment Contracts Act. The Court of Appeal deemed that a non-competition restriction may apply abroad regardless of whether foreign jurisdiction acknowledges the concept of the post-employment non-competition restriction. The decision became legally valid in March 2017 when the Supreme Court rejected the claimant’s petition for leave to appeal.

The case in brief

The employee worked in the position of Sales Manager in Finland at a Finnish company operating in the field of forest technology. She also handled the duties of international sales manager responsible for Austria, France and Germany. The employee resigned and soon thereafter, while she was still under the non-competition obligation, she entered into a new employment relationship with a crane construction company in Austria.

Taking into consideration that there were only four companies in Europe manufacturing timber cranes, that the employee’s new position and duties were similar to her previous duties and that the employee possessed substantial knowledge of her former employer’s business and trade secrets, the Finnish courts deemed that there was a particularly weighty reason for the use of the post-employment non-competition restriction.

Implications to employers

The Finnish courts deemed that the scope of application of the non-competition agreement may also apply abroad regardless of whether the other country’s legislation provides for the same or similar non-competition restrictions. In this case, Austria’s legislation did not recognize the concept of non-competition agreement. According to the Finnish courts, the fact that the other country’s legislation does not include provisions on non-competition restrictions is irrelevant because the non-competition agreement was made under the Finnish law.

In light of this decision, employers may now extend the post-employment non-competition restrictions also outside Finland as long the general requirements for the use of these restrictions exist.

We are happy to discuss the outcome and implication of this case with you if you have any further questions.