A Labor Contract is an agreement between an employee and an employer on paid work.
In the Labor Contract, there will be main contents such as work to be done, working time, rest breaks, salary, working location, contract duration, occupational safety and health conditions, and social insurance for employees, etc.
In addition, depending on the characteristics of the Enterprise and the agreement between the two parties, the Labor Contract shall also have other terms.
And one of the relatively common terms is: “Employees are not allowed to work for the company’s competitors after leaving”.
So is this provision in accordance with the law or not?
Let’s find out through PL & Partners Law Firm’s answer to reader’s question as follows:
A. READER’S QUESTION.
Hello lawyer.
I have signed a labor contract with Company M, which contains the following terms:
“Within one year from the date of termination of this Labor Contract, the employee is not allowed to work for the company’s competitors. If this provision is violated, the employee shall compensate the company an amount of VND 100 million.”
I want to know if the above clause is in accordance with the applicable law or not.
B. PL & PARTNERS LAW FIRM’S REPLY.
Hello, Thank you very much for trusting and sending questions to PL & Partners Law Firm.
Regarding your inquiry, we respond as follows:
Labor contract is an agreement between an employee and an employer on paid work, wages, working conditions, rights and obligations of each party in the employment relationship.
Recently, there are many enterprises, especially those specializing in the field of manufacturing, technology, etc., the assurance of business and technological secrets is the factor that is always prioritized.
Therefore, Article 21.2 of the Labor Code 2019 provides that:
| “When employees perform work that is directly related to business or technology secrets as prescribed by law, the employer shall have the right to reach a written agreement with the employee on the contents and duration of protecting the business or technological secrets, including benefits and compensation in the case of violation.” |
Besides, pursuant to Article 17 of the Labor Code 2019 on the acts that the employer is not allowed to do when entering into and performing the labor contract, applying a non-compete clause is not one of the prohibited acts when entering into the contract.
From the above provisions, it can be seen that the above-mentioned content that Company M offers in the labor contract is the agreement between the parties. If this agreement is signed by both parties and in accordance with the law, this commitment will be binding on the parties.
In short, when entering into a labor contract, employees should carefully read the terms that the employer offers. The parties can discuss and agree on the content of the agreement to suit the legitimate rights and interests of both parties. Agreeing or not agreeing to participate in the labor contract, which specifically includes provisions on protecting business and technological secrets, is completely decided by the employees themselves. If you have agreed to sign but violate the terms of the contract, you shall compensate for it according to the agreement.
If you need any legal assistance, please contact us via:
PL AND PARTNERS LAW FIRM
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