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Faroe Islands

Employment Agreement Essentials

Understand the key elements of employment contracts in Faroe Islands

Types of employment agreements

The labor market in the Faroe Islands is heavily reliant on collective bargaining agreements, which are negotiated between trade unions and employer associations. These agreements set the minimum standards for employment contracts, but individual contracts can offer additional benefits.

Collective Bargaining Agreements

Collective bargaining agreements (CBAs) are the mainstay of employment terms in the Faroe Islands. Unions like the Faroese General Workers' Union (Føroya Arbeiðarafelag) and employer federations negotiate industry-wide CBAs that establish minimum standards for wages and salaries, working hours, vacation days, parental leave, sick leave, and notice periods for termination. These CBAs provide a basic level of protection and benefits for employees across various sectors.

Individual Employment Contracts

Individual employment contracts are built on the foundation provided by CBAs. These contracts detail the specific terms of employment between an employer and an employee, including specific job duties and responsibilities, salary or wages, work schedule, and benefits. By law, employment contracts must be in writing (Faroese or Danish) and clearly outline the agreed-upon terms and conditions.

Fixed-Term and Temporary Contracts

Fixed-term and temporary contracts are also permitted in the Faroe Islands. These contracts usually specify a set duration for the employment and may offer different benefits compared to permanent contracts. There are regulations around how long fixed-term contracts can be renewed to prevent them from becoming indefinite.

Important Considerations

Additional points to remember about employment agreements in the Faroe Islands include union membership, which can provide additional benefits and legal support to employees, and the fact that while CBAs set minimum standards, there is no statutory minimum wage in the Faroe Islands. If disagreements arise regarding employment contracts, Faroese Labor Market Authorities can offer mediation services.

Essential clauses

In Faroe Islands employment agreements, it's crucial to clearly identify the employer and employee by name and title. The employee's job title, duties, and responsibilities should be defined.

Compensation and Benefits

The employee's salary or wages should be specified, which can exceed collective bargaining agreement (CBA) minimums. Any bonuses, allowances, or overtime pay should be outlined. Benefits offered, such as health insurance, pension plans, or paid time off (beyond CBA minimums), should be listed.

Working Hours and Schedule

The standard workweek hours (typically 37 hours) and any flexibility arrangements should be indicated. Procedures for overtime work, including compensation or time off in lieu, should be outlined.


The notice period required for termination by either party, following CBA guidelines, should be outlined. Grounds for termination with or without notice, based on the Faroese Working Environment Act, should be specified.

Dispute Resolution

Options for resolving workplace disputes, such as internal procedures or mediation, should be mentioned.

Additional Clauses

Consider including clauses on intellectual property rights, social media usage, or conflict of interest, if relevant.

Probationary period

Probationary periods are a standard part of employment agreements in the Faroe Islands. They provide a trial period for both the employer and the employee to assess suitability for the role before transitioning to a permanent position.

Evaluation Purpose

The probationary period serves as an evaluation phase for both parties. Employers can assess the employee's skills, performance, and fit within the company culture. On the other hand, employees can determine if the job meets their expectations and if the work environment is suitable for them.

There is no specific legislation governing probationary periods in the Faroe Islands. However, agreements can stipulate a probationary period of up to three months.

Key Aspects to Consider

The specific details of the probationary period, including its length and termination procedures, should be clearly outlined in the employment contract. Both employers and employees can terminate the employment during the probation period, typically with shorter notice periods compared to permanent positions. It's important to note that a successful probationary period doesn't guarantee a permanent position. However, positive performance can lead to confirmation of employment.

Benefits of a Probationary Period

For employers, a probationary period allows for a trial period to assess suitability before making a permanent commitment. Employees can identify any potential mismatch with the role or work environment early on. A well-defined probationary period can set clear expectations for performance and evaluation criteria.

Potential Disadvantages

The probationary period can create uncertainty for both parties, potentially impacting morale and motivation. Employees may have fewer rights during probation, such as shorter notice periods for termination.

Confidentiality and non compete clauses

Indian employment agreements often contain confidentiality and non-compete clauses to protect the employer's legitimate business interests. However, these clauses have specific enforceability limitations under Indian law.

Confidentiality Clauses

Confidentiality clauses are generally enforceable in India throughout the term of employment and, in some cases, even after termination. These clauses restrict employees from disclosing the employer's confidential information to unauthorized third parties. "Confidential information" can include trade secrets, customer lists, marketing strategies, and other sensitive business data.

The enforceability of confidentiality clauses hinges on the definition of "confidential information" being reasonable and clearly defined in the employment contract. The clause should not restrict the disclosure of information that is already publicly known or that the employee rightfully acquired through independent means.

Non-Compete Clauses

Unlike confidentiality clauses, non-compete clauses in India are generally not enforceable after the termination of employment. This is because Section 27 of the Indian Contract Act, 1872, prohibits restraints of trade. Courts view post-termination non-compete clauses as restricting an employee's right to earn a livelihood.

However, non-compete clauses may be enforceable during the term of employment, provided they are reasonable in scope and duration. These clauses can restrict employees from working for a competitor or soliciting the employer's clients during their employment.

Confidentiality clauses are generally enforceable in India to protect an employer's trade secrets and other confidential information. Non-compete clauses are generally not enforceable after the termination of employment in India due to restrictions on restraint of trade. Non-compete clauses may be enforceable during the term of employment if they are reasonable in scope and duration.

Employees in India should carefully review confidentiality and non-compete clauses in their employment agreements. If there are any concerns about the scope or enforceability of these clauses, it is advisable to consult with a legal professional.

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