Employee became liable for competitive activities

An employee with more than 20 years of experience started in a marketing agency where he quickly became responsible for one of the company’s biggest clients. However, after working with the client for a bit more than a year, he began to discuss the possibility of setting up a separate business to take over the work. He even involved a colleague in the planning.

A few months later, he resigned. His colleague followed shortly after, and the client terminated its contract with the company. Upon the expiry of his notice period, the former employee began to provide marketing services to the client via his new business.

The Court of Appeal concluded that the employee had breached his duty of loyalty and ordered him to pay NOK 100,000 in compensation to the company. It added that his new business also was liable for the amount, as it had breached the rules on good business practice.

IUNO’s opinion

The case shows that while the duty of loyalty may offer some protection, companies may want to consider using non-competition and non-solicitation clauses for key roles. The reason is that the duty of loyalty is limited to the employment and does not reach beyond the termination date. That said, breach of the duty of loyalty can serve as the basis for a compensation claim when companies suffer a financial loss.

IUNO recommends that companies assess the potential risks when deciding whether to include restrictive covenants in employment contracts. Without a clause, companies have to rely on the duty of loyalty alone when employees are engaging in competitive activities.

We have previously written about competitive activities here, where an employee was summarily dismissed, and here, where an employee became liable for NOK 2 million for competitive activities.

[Borgarting Court of Appeal's decision of 17 February 2025, in case LB-2024-102143]