Employers use non-solicitation clauses in the employment contracts of experts as substitutes for non-competition agreements. The purpose is to avoid liability for compensation arising from an agreement of non-competition. YTN wants non-solicitation clauses to be either prohibited entirely or to be directly equated with agreements of non-competition in legislation.
In recent years, non-solicitation clauses have become much more common in the employment contracts of senior salaried employees,” says Jan Degerlund, Chair of YTN’s Legal Team. The phenomenon has been observed in member contacts and surveys of YTN affiliates.
“The change took place after the obligation to compensate the employer for an agreement of non-competition was prescribed in 2022. Today, a non-solicitation clause is recorded in approximately one in two employment contracts of senior employees.”
A non-competition agreement may restrict an employee’s right to transfer to a company that can be considered a competitor of the previous employer after the end of their employment relationship.
However, Finnish law does not recognise the concept of a non-solicitation agreement. According to Degerlund, there are mainly two types of non-solicitation clauses in employment contracts.
“Firstly, those that prohibit soliciting former colleagues to join a new employer after changing jobs. And those that prohibit soliciting or even approaching the customers of the previous employer. Sometimes it even says that you must not approach potential customers.
The duration of the non-solicitation clause in the employment contract is usually six months, sometimes twelve.”
Definition of solicitation not tested in court
From the point of view of a highly educated expert, a non-solicitation agreement may be a major restriction on freedom of activity, especially if the prohibition is broadly defined in the employment contract. Especially in sales and marketing work, this causes difficult situations, as the circles are small in many branches in Finland.
“If you start your own company, a non-solication agreement can be a significant obstacle to starting a business. It often results in restrictions very similar to those of a non-competition agreement.
From a legal point of view, it is also unclear what should be regarded as “soliciting customers”.”
“Personally, I think that soliciting is proactive. Meaning that one should approach the customers themselves, not the other way around. However, there is probably no precedent tested in the Supreme Court in Finland yet,” Degerlund says.
A compensation obligation for the employer for an agreement of non-competition was stipulated four years ago. According to Degerlund, the amendment to the Employment Contracts Act forced employers to remove unjustified agreements of non-competition from employment contracts. The legislator should now take measures to prevent companies from using non-solicitation agreements similarly to agreements of non-competition.
Marttinen’s report welcome
Minister of Employment Matias Marttinen initiated a survey on non-solicatation clauses in September. According to the assignment, the purpose is to prepare the basis for regulating them stricter.
“Ordering a survey was a very welcome decision by the Minister. Non-solication agreements should be treated similarly to agreements of non-competition, i.e. everything that applies to agreements of non-competition in legislation should be considered to apply to them. Alternatively, non-solicitation clauses could even be prohibited entirely, i.e. such a clause in the employment contract would be considered null and void. This approach has also been used elsewhere,” says Teemu Hankamäki, Chair of YTN.
A key problem is that non-solication clauses are interpreted very broadly in employment contracts and it has practically replaced agreements of non-competition.
“And if you look at what the agreement of non-competition was originally aimed at, it only concerned a very small core group of experts who had strategic knowledge of a company’s operations in such a way that their transfer to a competitor’s service could cause direct damage to the company,” Hankamäki explains.
A large number of senior salaried employees are now subject to non-solicitation clauses. The situation is very detrimental, firstly at the individual level, and secondly, it is also a social problem that stiffens the structures of the labour market, as non-solicitation clauses weaken the mobility of experts and middle management in companies.
“Unfortunately, there are already too many structural factors slowing down labour mobility in Finland, and non-solicitation agreements actually further weaken the situation. This is neither in the interest of the individual nor of society.
A decision by the Eastern Finland Court of Appeal in April supports YTN’s wishes regarding a legislative amendment. It considered that a non-solicitation agreement was in fact an agreement of non-competition pursuant to the Employment Contracts Act. It had narrowed the employee’s opportunities to work in the same branch as their old employer after the end of the employment relationship.
Text: Mikko Nikula
Images: Opa Latvala