Customer clauses in employment: rules and requirements in Denmark

A customer clause is a clause in an employment contract that prohibits the employee from contacting, approaching or entering into agreements with the business's customers for a period after the employment ends. The customer clause is an important tool for businesses that want to protect their customer relationships from following a former employee.

Since a legislative reform that took effect in 2016, the rules on customer clauses have been tightened markedly. This guide explains the current rules and what a customer clause must contain to be valid.

What is a customer clause?

A customer clause (in English, a non-solicitation clause) is an agreement that limits an employee's right to approach, work on or enter into an agreement with the former employer's customers when the employee leaves the business.

The customer clause differs from a non-compete clause:

	Customer clause	Non-compete clause
What is limited	Contact with specific customers	All competing activity
Reach	Narrow, only the covered customers	Broad, whole industries or markets
Duration (max)	12 months	12 months
Compensation	Yes	Yes
Governed by	The Employment Clauses Act	The Employment Clauses Act

Many employment contracts contain both types of clause, as they protect against different risks.

Legislation: the Employment Clauses Act

The rules on customer clauses are governed by the Employment Clauses Act (ansættelsesklausulloven, Act no. 1565 of 15 December 2015), which applies to clauses entered into on or after 1 January 2016.

The new rules from 2016 tightened the requirements for customer clauses considerably and improved employees' legal position. Customer clauses entered into before 2016 follow the earlier rules, including section 18 a of the Salaried Employees Act, while newer clauses must meet the stricter requirements of the Employment Clauses Act.

When is a customer clause valid?

For a customer clause to be legally valid under the Employment Clauses Act (section 6), it must meet a number of requirements:

1. In writing

The customer clause must appear in a written agreement, typically in the employment contract or a separate appendix. Oral customer clauses are invalid.

2. A requirement of at least 6 months' employment

The customer clause can only be enforced once the employment relationship has lasted an unbroken period of at least 6 months at leaving.

3. Time limit

A customer clause can have a duration of at most 12 months from the time of leaving. A customer clause of, for example, 24 months can be reduced by a court to the lawful maximum.

4. Specific customers

The customer clause may only cover customers the employee has had a business connection with within the last 12 months before the termination. At leaving, the employee must receive a written list of the covered customers. A general clause prohibiting all contact with "any current and future customer" is too broad.

Example wording:

"For 12 months from the date of leaving, the Employee may not contact, work on or enter into agreements with customers the Employee has had a business connection with within the last 12 months of the employment."

5. Compensation, the most critical condition

This is the condition most often overlooked: the employee is entitled to compensation for the period the customer clause applies, at the same rates as a non-compete clause (section 8 of the Employment Clauses Act):

Duration of the clause	Without other suitable work	With other suitable work (from month 3)
Up to 6 months	At least 40% per month	At least 16% per month
Over 6 and up to 12 months	At least 60% per month	At least 24% per month

The compensation for the first 2 months is paid as a lump sum (at least 40% or 60% respectively) and cannot be reduced. From month 3 the employee has a duty to mitigate; if they find other suitable work, the ongoing compensation can be reduced to a minimum of 16% or 24%.

Example: An employee with a monthly pay of DKK 50,000 is subject to a 6-month customer clause and does not find new suitable work. The compensation is at least 40% per month, that is DKK 20,000 a month during the clause period, of which the first 2 months are paid as a lump sum at leaving.

6. The clause must be agreed at the latest on leaving

A customer clause can be entered into during the employment or as part of a severance agreement, but it cannot validly be imposed unilaterally after the employee has actually left.

When does the customer clause lapse?

The customer clause lapses or does not apply if:

1. The employer dismisses without reasonable cause If the employer dismisses the employee without the employee having given reasonable cause, the customer clause does not apply, under section 11 of the Employment Clauses Act. The clause is therefore as a rule only maintained on the employee's own resignation or on dismissal for reasons attributable to the employee.

2. The employer cancels the clause The employer can cancel the customer clause with one month's notice. This is relevant if the business no longer wants to pay the compensation. The employee keeps the right to the lump sum for the first 2 months if the termination occurs within 6 months of the cancellation of the clause.

3. The employee terminates due to the employer's breach If the employee terminates the employment because of the employer's material breach, the clause as a rule does not apply.

4. The clause is invalid If the clause does not meet the formal requirements (missing compensation, too long a duration, too broad a reach), it can be set aside.

Combining a customer clause and a non-compete clause

If both a customer clause and a non-compete clause are agreed with the same employee as a combined clause, special rules apply (sections 7 and 9 of the Employment Clauses Act):

• The combined clause may run for at most 6 months from leaving
• The compensation is at least 60% of the monthly pay, reduced to at least 24% if the employee finds other suitable work
• The first 2 months are paid as a lump sum (at least 60%) that cannot be reduced

The customer clause and garden leave

If the employee is put on garden leave during the notice period, the customer clause does not start to run from the start of the garden leave. It runs from the actual end date of the employment (the expiry of the notice period).

That means an employee with 6 months' notice and a 12-month customer clause can in practice be bound for up to 18 months from the start of the garden leave. The compensation for the clause runs from the actual end of the employment.

What happens on a breach of the customer clause?

If the employee breaches a valid customer clause, the employer can demand:

1. A contractual penalty The employment contract should state a contractual penalty for a breach. The penalty can be reduced by a court if it is unreasonable, under section 36 of the Contracts Act.

2. Damages for the actual loss In addition to the penalty, the employer can claim damages for the documented loss, typically the turnover lost.

3. An injunction In serious cases the employer can seek an injunction against the employee's continued contact with the customers.

Important: a claim for a contractual penalty requires that it is agreed in the contract. If it is missing, the employer can only claim damages, which are harder to document.

Practical advice for employers

Be specific about customers: state clearly that the clause only covers customers the employee has had direct contact with, not all the business's customers.

Document customer relationships: keep track of which customers the employee has had contact with. It is decisive evidence in any dispute, and a CRM system is a valuable resource here.

Set a realistic duration: 12 months is the maximum, but shorter periods are often more defensible and easier to enforce.

Settle compensation correctly: pay the statutory compensation and document the payments.

Practical advice for employees

Understand the clause's reach: which customers does it cover? Is the clause valid?

Check the compensation: is the statutory compensation being paid? If it is missing, the clause as a rule cannot be enforced.

Check whether the clause has lapsed: if you are dismissed without it being attributable to your own conduct, the clause as a rule does not apply.

Seek advice if in doubt: customer clauses are complex. Contact your union or a lawyer before you start a new job.

Disputes about customer clauses: the courts' practice

Danish courts regularly handle disputes about customer clauses. The case law shows a number of recurring themes:

Burden of proof and documentation

The employer bears the burden of proving that the employee has breached the clause. That requires documentation that:

• The employee contacted the customer in question (emails, meeting invitations, orders)
• The contact occurred within the clause period
• The customer was a relevant customer the employee had a business connection with

The courts' power to modify clauses

Even a clause that meets the formal requirements can be reduced by the courts if it is unreasonable in the specific case. The courts can shorten the duration, narrow the reach or reduce the contractual penalty.

When do the courts set aside customer clauses?

• When the clause is too broad in its definition of "customers"
• When the compensation has not been paid correctly
• When the dismissal came from the employer without reasonable cause
• When a combined clause exceeds 6 months

Customer clauses and digital contact lists

A particularly modern problem: what happens when an employee bound by a customer clause has the customers' contact details stored on their private phone or via LinkedIn?

Case law is still developing, but generally:

• Accepting a LinkedIn request from a former customer is not necessarily a breach
• Sending active sales approaches to the covered customers via LinkedIn can be a breach
• Borderline cases are decided on a concrete assessment of the intent

Prevention: include a provision that the employee, on leaving, deletes or returns customer data from private devices.

The customer clause in the severance agreement

In many departure situations, the parties negotiate the terms of an existing customer clause. The employer can:

• Waive the clause
• Maintain the clause and pay the statutory compensation
• Modify the clause, for example reduce the duration

For the employee it is worth remembering: a customer clause that does not apply (for example because the employer dismissed without reasonable cause) has no value in a negotiation.

Conclusion

A customer clause is an important tool for protecting customer relationships, but only when it meets the Employment Clauses Act's requirements on writing, length of employment, the customer base, duration and compensation. Many customer clauses are in practice ineffective because employers have forgotten the compensation or agreed too long a duration. Use a template adapted to Danish law, and review the clause with a commercial lawyer if in doubt.

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The content of this article is for guidance only and does not constitute legal advice. Consult a commercial lawyer for advice on your specific situation.