Cavities in the dentist's non-competition clause
A week after a dentist left his position at a dental clinic, he opened his own clinic close to the company he previously worked at. He was subject to a non-competition clause prohibiting him from competing with the company for one year after termination. After an overall assessment, the court annulled the clause because it was unreasonable.
A dentist worked at a dental clinic in the south of Sweden for seven years and was subject to a non-competition clause. The clause prohibited him from establishing his own clinic or working for a competing private clinic close to the company for a year after termination. The clause did not prevent him from working at a public dentist clinic.
If the employee breached the non-competition clause, the penalty would be 300,000 SEK, corresponding to the estimated customer loss. A week after resigning, he opened his own clinic about 250 meters from his old workplace.
No compensation, no clause?
The court ruled that the non-competition clause was unenforceable, despite the employee opening his clinic close to the company. This was because the clause was unfair due to the duration of the non-competition clause combined with no form of compensation.
It was legitimate for the company, to have a non-competition clause to protect the business. However, the court additionally concluded, that it was ethically wrong if the employee, as a medical professional, could not bring his customers with him when he left the company. Also, nothing suggested that the employee had acquired his customers due to anything other than his professional skill and personal qualities.
IUNO's opinion
If a non-competition clause even restricts an employee slightly for a short period of time, compensation will, in most cases, be a deciding factor to consider if it is fair. This threshold only increases when the clause restricts the employee's livelihood significantly. If the clause is unfair, it can be set aside by the courts.
To ensure the validity of a clause, IUNO recommends that companies view all components of the non-competition clauses in the light of the specific employee. Companies should especially be aware that non-competition clauses imposed on employees in some professions, such as doctors and dentists or even hairdressers or lawyers, can be viewed as unethical and lead to invalidity.
[Blekinge District Court Case T-1748-21 of 25 October 2022]
A dentist worked at a dental clinic in the south of Sweden for seven years and was subject to a non-competition clause. The clause prohibited him from establishing his own clinic or working for a competing private clinic close to the company for a year after termination. The clause did not prevent him from working at a public dentist clinic.
If the employee breached the non-competition clause, the penalty would be 300,000 SEK, corresponding to the estimated customer loss. A week after resigning, he opened his own clinic about 250 meters from his old workplace.
No compensation, no clause?
The court ruled that the non-competition clause was unenforceable, despite the employee opening his clinic close to the company. This was because the clause was unfair due to the duration of the non-competition clause combined with no form of compensation.
It was legitimate for the company, to have a non-competition clause to protect the business. However, the court additionally concluded, that it was ethically wrong if the employee, as a medical professional, could not bring his customers with him when he left the company. Also, nothing suggested that the employee had acquired his customers due to anything other than his professional skill and personal qualities.
IUNO's opinion
If a non-competition clause even restricts an employee slightly for a short period of time, compensation will, in most cases, be a deciding factor to consider if it is fair. This threshold only increases when the clause restricts the employee's livelihood significantly. If the clause is unfair, it can be set aside by the courts.
To ensure the validity of a clause, IUNO recommends that companies view all components of the non-competition clauses in the light of the specific employee. Companies should especially be aware that non-competition clauses imposed on employees in some professions, such as doctors and dentists or even hairdressers or lawyers, can be viewed as unethical and lead to invalidity.
[Blekinge District Court Case T-1748-21 of 25 October 2022]
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Anders
Etgen Reitz
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