Requirement from Temporary Employment Agency was subject to the Danish Act on Non-Hire Clauses
By
Jacob Falsner
28 May 2014
A temporary employment agency's requirement for prior consent to a user company's recruitment of a temporary agency worker was subject to the provisions of the Danish Act on Non-Hire Clauses requiring a written agreement with the temporary agency worker. This was the verdict of the Danish Western High Court in its judgment of 2 April 2014.
A user company had recruited a temporary agency worker who had previously been hired through a temporary employment agency. Pursuant to clause 2.6 of the temporary assignment contract, the user company was not allowed "without the written consent of the temporary employment agency to enter into any financial agreement with the temporary agency worker as from the signing of the assignment contract and five years thereafter". However, the temporary assignment contract did not contain any stipulations with regard to the conditions under which the temporary employment agency was to give its consent to the user company's recruitment of the temporary agency worker.
In the lawsuit, the temporary employment agency had claimed payment of a contract penalty from the user company due to breach of the temporary assignment contract. To this, the user company objected, inter alia, that the temporary assignment contract was in contravention of the provisions of the Danish Act on Non-Hire Clauses.
Pursuant to the Act on Non-Hire Clauses, a non-hire clause is defined, inter alia, as an agreement which an employer concludes with other undertakings with a view to preventing or restricting an employee's opportunities to obtain employment with another undertaking. Under the Act, the validity of a non-hire clause is conditional upon the temporary employment agency having entered into a written agreement with the employee whose job opportunities are restricted by the non-hire clause. However, the Act does not apply to cases where a temporary employment agency receives a fair payment for the user company's recruitment of an assigned temporary agency worker. The purpose of this stipulation is to prevent that the temporary employment agency plays the role of a free recruitment agency for the user company. The fair payment must measure up to the expenses of the temporary employment agency for the training of the temporary agency worker, saved recruiting expenses, etc.
First, the High Court had regard to the fact that the temporary assignment contract contained a restriction for the temporary agency worker that had to be considered as a non-hire clause which was basically subject to the Act on Non-Hire Clauses. In this connection, the High Court attached importance to the fact that the employment of the temporary agency worker by the user company was conditional upon the temporary employment agency's prior consent.
Subsequently, the High Court pointed out that the temporary assignment contract did not specify the conditions on which the temporary employment agency would give its consent. However, on basis of the submitted evidence, the High Court concluded that the consent would be conditional upon the user company's payment of a recruitment fee. All the same, the High Court did not find it substantiated that the recruitment fee would be a fair payment pursuant to the Act on Non-Hire Clauses. Therefore, clause 2.6 of the temporary assignment contract was subject to the Act on Non-Hire Clauses.
Since no written agreement had been concluded with the temporary agency worker, the High Court established that the non-hire restriction in clause 2.6 was invalid.
The judgment shows that a temporary employment agency should make sure that the fair payment to be made by the user company for recruiting the temporary agency worker is stipulated in the agency's cooperation agreement with the user company in order for the agency to be able to enforce such stipulation. Furthermore, the judgment shows that non-compliance with the provision of the Act on Non-Hire Clauses to enter into a written agreement with the employee whose job opportunities are restricted by a non-hire clause also entails invalidity of the contractual relationship between the parties of the non-hire clause.
The case concerns the time before the entry into force of the Danish Act on Temporary Agency Workers. Therefore, it is important to be aware of the fact that after the entry into force of this Act it is not possible to "repair" a non-hire clause, according to which a user company has to pay an unreasonable amount to the agency for recruiting the temporary agency worker, by concluding a written agreement with the temporary agency worker. Consequently, if the payment agreed upon between the agency and the user company is not fair, the clause will be invalid irrespective of whether a written agreement has been made with the temporary agency worker.
In the lawsuit, the temporary employment agency had claimed payment of a contract penalty from the user company due to breach of the temporary assignment contract. To this, the user company objected, inter alia, that the temporary assignment contract was in contravention of the provisions of the Danish Act on Non-Hire Clauses.
Pursuant to the Act on Non-Hire Clauses, a non-hire clause is defined, inter alia, as an agreement which an employer concludes with other undertakings with a view to preventing or restricting an employee's opportunities to obtain employment with another undertaking. Under the Act, the validity of a non-hire clause is conditional upon the temporary employment agency having entered into a written agreement with the employee whose job opportunities are restricted by the non-hire clause. However, the Act does not apply to cases where a temporary employment agency receives a fair payment for the user company's recruitment of an assigned temporary agency worker. The purpose of this stipulation is to prevent that the temporary employment agency plays the role of a free recruitment agency for the user company. The fair payment must measure up to the expenses of the temporary employment agency for the training of the temporary agency worker, saved recruiting expenses, etc.
First, the High Court had regard to the fact that the temporary assignment contract contained a restriction for the temporary agency worker that had to be considered as a non-hire clause which was basically subject to the Act on Non-Hire Clauses. In this connection, the High Court attached importance to the fact that the employment of the temporary agency worker by the user company was conditional upon the temporary employment agency's prior consent.
Subsequently, the High Court pointed out that the temporary assignment contract did not specify the conditions on which the temporary employment agency would give its consent. However, on basis of the submitted evidence, the High Court concluded that the consent would be conditional upon the user company's payment of a recruitment fee. All the same, the High Court did not find it substantiated that the recruitment fee would be a fair payment pursuant to the Act on Non-Hire Clauses. Therefore, clause 2.6 of the temporary assignment contract was subject to the Act on Non-Hire Clauses.
Since no written agreement had been concluded with the temporary agency worker, the High Court established that the non-hire restriction in clause 2.6 was invalid.
The judgment shows that a temporary employment agency should make sure that the fair payment to be made by the user company for recruiting the temporary agency worker is stipulated in the agency's cooperation agreement with the user company in order for the agency to be able to enforce such stipulation. Furthermore, the judgment shows that non-compliance with the provision of the Act on Non-Hire Clauses to enter into a written agreement with the employee whose job opportunities are restricted by a non-hire clause also entails invalidity of the contractual relationship between the parties of the non-hire clause.
The case concerns the time before the entry into force of the Danish Act on Temporary Agency Workers. Therefore, it is important to be aware of the fact that after the entry into force of this Act it is not possible to "repair" a non-hire clause, according to which a user company has to pay an unreasonable amount to the agency for recruiting the temporary agency worker, by concluding a written agreement with the temporary agency worker. Consequently, if the payment agreed upon between the agency and the user company is not fair, the clause will be invalid irrespective of whether a written agreement has been made with the temporary agency worker.
