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

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

According to the trade unions this practice has been growing to a worrying extent.

Akava, the Confederation of Unions for Professional and Managerial Staff conducted a survey among its members in 2017. Some 33 per cent from the 2 119 who replied had a non-compete clause in their employment contracts. Four per cent had a separate non-compete agreement.

Vesa Vuorenkoski, Head of Political Affairs at Akava told Yle this summer that this year some 60 – 65 per cent of new employment contracts for Akava members include non-compete clause. This figure should be one per cent, he says. The non-competition agreements are supposed to be used in very special cases and cover only the top managers, not average specialists.

Akava is not alone on this issue. Even SAK, the Central Organisation of Finnish Trade Unions have reported cases where a non-compete clause is included in some workers’ employment contract.

“…the use of non-compete clause has been on the increase and is being used without any grounds whatsoever.”

Inka Douglas, a lawyer from the Finnish Confederation of Professionals STTK says that the use of non-compete clause has been on the increase and is being used without any grounds whatsoever. STTK is demanding a limit to the use of the clause.

What makes the situation especially difficult is that the new employees are required to agree to the clause when signing an employment contract. In this situation there is hardly any space for a balanced negotiation.

Unbalanced rules

The PM Antti Rinne Government has been hearing concerns from all involved. “The … prohibition of competing activities will be restricted by clarifying the legislation and enacting balanced provisions on sanctions for the use of prohibited terms and conditions”, according to the government programme.

What it will be in practise, is still unclear. A working group appointed by the Ministry of Economic Affairs and Employment last year published in August a report on the need to amend the rules concerning non-competition agreements.

The report clarifies the issue from legal and practical points of view. The working group member from the Confederation of Finnish Industries EK, however, saw the existing situation as more or less satisfactory. Problems should be resolved in the first place by better information.

The working group members from the three trade union confederations considered the practice as being very problematic and in need of legal reforms. They listed several problems which mostly deal with the totally unbalanced benefits of non-competitive agreements.

Vesa Vuorenkoski summarises the imbalance in his blog at Akava website. The existing law allows the employer to dictate such a non-compete clause to the detriment of the employee. In other words the employee gets the short end of the stick whereas the employer is awarded major benefits without any obligations.

If the non-competition agreement is for a period of no longer than six months, it costs the employer nothing, Vuorenkoski notes. But the employee must pay a fine if he or she breaks the agreement or in some cases must refrain from taking up a job in a similar or competing industry within six months.

Helsinki (29.08.2019 – Heikki Jokinen)



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