Sweden: Court ruling that a managing director who resigned had to observe a reasonable notice period of six months, during which the managing director was prohibited to compete with the employer

The managing director of an accounting firm resigned after receiving a notification of dismissal from the employer’s side. Since the parties had not agreed on a specific notice period, the managing director claimed that he could leave his employment without observing any notice period. As such, the managing director left his employment and started competing with his former employer. The accounting firm, however, claimed that the managing director was obliged to observe a reasonable notice period even if there was no agreed notice period. Thus, the accounting firm filed an interim injunction to prohibit the managing director from competing with the accounting firm during a period of six months under penalty of a SEK 2 million fine. The Labour Court found that the managing director was obliged to observe a reasonable notice period when resigning, as the accounting firm was entitled to a reasonable period to facilitate a satisfactory handover of responsibilities and know-how, as well as a period where the managing director remained bound by duties of loyalty and non-competition. Considering case law and common practise, where six months’ notice has been deemed reasonable when an employer dismisses a managing director, the Court found that the same period of notice should be applied in case of a managing director’s own resignation. Consequently, the Court ruled in favour of an interim injunction prohibiting the managing director, under penalty of a SEK 500,000 fine, to compete with the accounting firm until the expiry of a six months’ notice.