It is not allowed to accept a non-salaried assignment on the board of directors in a competing company

According to judgment of 5 February 2016 from the Danish Western High Court, an employer's summary dismissal was justified in consequence of the employee's non-salaried assignment on the board of directors in a competing company.

The case involved the question whether an employee had acted disloyally to his former employer when he became a member of the board of directors in another company during his release period. According to the severance agreement concluded between the employee and the former employer, the employee was not entitled to engage - in whole or in part - in a competing undertaking.

The Court found that the employee's former employer had provided sufficient evidence of being a competitor of the other undertaking where the employee now was a member of the board of directors and that the competition between the two companies was of major importance. In the period where the employee was released from his duties while receiving salary from his former employer, the employee was - due to his executive position and his substantial knowledge of internal matters of the company - subject to a more stringent obligation not to promote the interests of a competing company.

Basically, a managerial employee fails to comply with this duty of loyalty if he becomes a board member in a competing company whilst receiving salary from the former employer. The High Court established that this basic premise also applies even though the employee in question does not receive remuneration for the assignment on the board and even though the actual nature and extent of the assignment on the board could not be established more explicitly.

The employee had not submitted evidence of any circumstances that could constitute grounds for deviating from the above principle. Furthermore, the employee had not asked the former employer's prior permission to enter the board of directors of the competing company.

Consequently, it was justified that the employee was summarily dismissed by his former employer.

The judgment shows that the assessment of the employee's duty of loyalty in connection with a summary dismissal may be more stringent if a competing undertaking is involved.

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