Asia: Post-employment covenants

Although often included in employment contracts, the enforceability of post-employment non-competition obligations can vary greatly from jurisdiction to jurisdiction.

Country Can employees be restrained from working for a competing business following termination of their employment?
China Yes, but post-employment non-competition obligation can only apply to senior managers, senior technical personnel and other senior employees who have duties of confidentiality. The maximum term of a post-employment non-competition period is 2 years. The employer generally needs to pay the employee 30% of his/her monthly salary during the term of post-employment non-competition in order to make such obligation enforceable.
Japan Yes, provided the covenants are deemed “reasonable”. There are decisive rules around what will be considered reasonable and Japanese courts will generally consider factors such as the terms and conditions of employment, the position of the employee, the level of remuneration, the length and geographical scope of the restriction, and whether the employee is paid any compensation in exchange for the restriction.
Singapore Yes, however only in circumstances where the employer can demonstrate that the post-employment restraint of trade was intended to protect the employers’ legitimate proprietary interests and is reasonable in all the circumstances, both as between the parties and in the public interest. The assessment undertaken by courts in determining whether a clause is enforceable is extensive and fact specific.
South Korea Yes, but with limitations. Korean law recognises that post-employment covenants restrict employees’ freedom to choose their occupation and their right to employment. As such, these clauses will be read to restrict an employee’s right to work only to the extent “reasonable”. Factors taken into account to determine “reasonableness” may include, for example, the duration and geographical extent of the restriction, the provision of compensation for the restriction, the employee’s positon pre-resignation or termination, and the reason for any resignation.

 

Leave a Comment

Filed under Jurisdiction: Asia, Protection of business interests (including restrictive covenants and confidential information), Termination of employment

Leave a Reply

Your email address will not be published. Required fields are marked *