{"id":2731,"date":"2021-11-29T10:51:00","date_gmt":"2021-11-29T08:51:00","guid":{"rendered":"https:\/\/sisulaw.fi\/?p=2731"},"modified":"2023-10-18T17:56:06","modified_gmt":"2023-10-18T14:56:06","slug":"non-competition-agreements-subject-to-compensation-legislation-amendment-on-1-january-2022","status":"publish","type":"post","link":"https:\/\/sisulaw.fi\/en\/non-competition-agreements-subject-to-compensation-legislation-amendment-on-1-january-2022\/","title":{"rendered":"NON-COMPETITION AGREEMENTS SUBJECT TO COMPENSATION &#8211; LEGISLATION AMENDMENT ON 1 JANUARY 2022"},"content":{"rendered":"<section class=\"wp-sisalto content-section\"><div class=\"row content-section-row\"><div class=\"column\"><p>With a non-competition agreement, it is possible to restrict an employee\u2019s right to transfer to a service of a competing employer after employment relationship\u2019s expiry based on a particularly weighty reason related to either employer\u2019s operations or employment relationship.<\/p>\n<p><strong>What is changing?<\/strong><\/p>\n<p><strong>\u00a0<\/strong>In the future, employers are liable to pay an employee, who is a contractual party of a non-competition agreement, compensation for the duration of a non-competition term, i.e. limitation period. If the limitation period is:<\/p>\n<ul>\n<li>6 months, a compensation payable for the limitation period corresponds with 40 % of an employee\u2019s salary.<\/li>\n<li>More than 6 months, a compensation payable for the limitation period corresponds with 60 % of an employee\u2019s salary.<\/li>\n<\/ul>\n<p>The aforesaid compensation will become payable during the limitation period following the previously applied pay period.<\/p>\n<p>As a main rule, the maximum duration of a limitation period is one year from the expiry of the employment relationship.<\/p>\n<p><strong>When?<\/strong><\/p>\n<p>The legislation amendment enters into force on 1 January 2022. A non-competition agreement agreed upon prior the new law enters into force shall be governed by the previously valid legislation until one year has passed from the amendment\u2019s entry into force.<\/p>\n<p><strong>Why?<\/strong><\/p>\n<p>The amendment aims e.g., to reduce the number of groundless non-competition agreements and to increase flexibility in labour market.<\/p>\n<p><strong>How to prepare?<\/strong><\/p>\n<p>As employees are in the future automatically entitled to a compensation based on a non-competition agreement, it is recommendable to go through non-competition agreements entered into by the company in order to evaluate, among others:<\/p>\n<ul>\n<li>Is a non-competition agreement and its limitation period still justified?<\/li>\n<li>Is a non-competition agreement in line with the employer\u2019s interests regardless of the compensation obligation deriving from the legislation amendment?<\/li>\n<li>Is it necessary to update non-competition agreements \/ employment agreements \/ employment agreement templates \/ internal guidelines?<\/li>\n<li>Can the employer\u2019s interests be secured in a way other than a non-competition agreement, such as making more specific agreements on non-solicitation of customers\/personnel, confidentiality and\/or intellectual property rights?<\/li>\n<\/ul>\n<p>Depending on the results of the check-up, it is recommendable for the employers to terminate \u201cunnecessary\u201d non-competition agreements and\/or to agree on shorter limitation periods to avoid a situation where the employer is obligated to pay compensation sums which are disproportionate with the agreements\u2019 original objectives.<\/p>\n<p>Until one year has passed from the legislation\u2019s entry into force, an employer is entitled to terminate with an immediate effect a non-competition agreement which was made prior the amendment\u2019s entry into force. In addition \u2013 until an employee has terminated one\u2019s employment agreement \u2013 an employer is entitled to terminate a non-competition agreement by following a notice period of at least one third of the length of the limitation period, however with a minimum length of two months.<\/p>\n<p><strong>Further information:<\/strong><\/p>\n<p>Hanna Vuoria<br \/>\nattorney-at-law<br \/>\n050\u00a0362 5787<br \/>\nhanna.vuoria@sisulaw.fi<\/p>\n<\/div><\/div><!-- .content-section-row --><\/section><!-- .wp-sisalto -->","protected":false},"excerpt":{"rendered":"<p>With a non-competition agreement, it is possible to restrict an employee\u2019s right to transfer to a service of a competing employer after employment relationship\u2019s expiry based on a particularly weighty reason related to either employer\u2019s operations or employment relationship. What is changing? \u00a0In the future, employers are liable to pay an employee, who is a<a class=\"read-more\" href=\"\">Read more <i class=\"fa fa-angle-double-right\"><\/i><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[19],"tags":[],"class_list":["post-2731","post","type-post","status-publish","format-standard","hentry","category-current-issues"],"acf":[],"aioseo_notices":[],"aioseo_head":"\n\t\t<!-- All in One SEO Pro 4.9.9 - aioseo.com -->\n\t<meta name=\"description\" content=\"Employers are liable to pay an employee, who is a contractual party of a non-competition agreement, compensation for the duration of a non-competition term.\" \/>\n\t<meta name=\"robots\" content=\"max-image-preview:large\" \/>\n\t<meta name=\"author\" content=\"@user\"\/>\n\t<meta name=\"google-site-verification\" content=\"TG6dWJq5D5kPtktFc7p3MKTIsXBkH3095cDCyWk2Q10\" \/>\n\t<link rel=\"canonical\" href=\"https:\/\/sisulaw.fi\/en\/non-competition-agreements-subject-to-compensation-legislation-amendment-on-1-january-2022\/\" \/>\n\t<meta name=\"generator\" content=\"All in One SEO Pro (AIOSEO) 4.9.9\" \/>\n\n\t\t<meta name=\"google-site-verification\" content=\"f49rw72FicGtykU8PBOV9LxprRTMI0cEzVSJPy---JE\" \/>\n\t\t<meta property=\"og:locale\" content=\"en_US\" \/>\n\t\t<meta property=\"og:site_name\" content=\"Yritys\" \/>\n\t\t<meta property=\"og:type\" content=\"article\" \/>\n\t\t<meta property=\"og:title\" content=\"Non-competition Agreement Legislation: Sivenius, Suvanto &amp; 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