The right to work and freedom of employment of employees is a fundamental right acknowledged in Vietnamese law. However, currently, the enterprises choose to sign Non-Competition Agreements with employees to prevent their employees from working for competitors to protect information related to their trade and technology secrets. This agreement benefits the employer but negatively affects the employee. The article shows how this problem is understood in practice and offers some suggestions to increase the possibility of a Non-Competition Agreement.
Points of view
In principle, employees have the right to work, freely choose their careers and workplace[1] and these rights are protected by law. Therefore, when an employee terminates a labor contract with an employer, he/she has the right to choose to work for any enterprise, even if that enterprise is a competitor of a former employer.
However, in case an employee has signed a Non-Competition Agreement (“NCA”)[2] which is in the labor contract or independent of the labor contract, with an employer, the answer to the above question is still controversial and divided into two opposing views are as follows:
First point of view
The first point of view is that an employee can still work for a competitor of former employer, even if both singed a NCA. This view is based on four reasons.
Firstly, at present, there is no specific legal regulation on NCA.
Secondly, with the NCA, the employer has deprived the employee’s basic right to choose a workplace, affecting their career opportunities and life.
Thirdly, the labor relationship is an asymmetrical relationship, in which the employee is always the weak party and they rarely have conditions to negotiate about contents of contracts with the employer.
Fourthly, the NCA is associated with labor relations, so when the labor contract is terminated, all rights and obligations of the employee also cease.
Therefore, the NCA in labor relations is an invalid agreement because its content and purpose violates the basic principles of Vietnamese law, “violating the prohibition of the law”[3].
Second point of view
The second point of view is that an employee is not allowed to work for a competitor of a former employer because both signed a NCA. This view is based on three reasons.
Firstly, the purpose of NCA is to protect information related to trade secrets and technology secrets (hereinafter referred to as “Confidential Information”) of the employer. Especially in the current context, Confidential Information increasingly plays a decisive role for the survival of an enterprise. Therefore, the right to protect the Confidential Information of the employer is a legitimate right.
Secondly, the employees always have time to consider and make a decision whether to sign a NCA to enter into a labor contract or not. The signing of NCAs is also a choice of workplace of employees when they want to catch the career opportunities and accept to waive the freedom right to choose the workplace that the law has given them. Therefore, the signing of NCAs is still established on the basis of goodwill, honesty, equality and voluntary commitment between the parties.
Thirdly, a NCA is considered a civil agreement in labor relations. Therefore, when the labor relationship terminates, the contents of NCA will still be binding on the employee.
Therefore, a NCA is considered a legal agreement and has legal effect.
Acceptance of NCAs
Currently, in Vietnam, courts uphold validity of NCAs. Namely, on 12th June 2018, the People’s Court of Ho Chi Minh City issued Decision No. 755/2018/QD-PQTT[4] on recognizing the validity of the decision of the Arbitration Tribunal under the Vietnam International Arbitration Center (VIAC). According to this decision, the court accepted the employer’s request and ordered the former employee to pay a fixed amount of compensation in the NCA due to the employee’s violation of NCAs. This decision is considered as a precedent recognizing legitimacy of NCAs.
In essence, a NCA tends to protect the interests of employers and handicaps for employees. But the fact that whether a NCA is accepted, completely depends on legal point of views and interpretation of dispute settlement bodies. Therefore, in order to both respect agreements and protect legitimate interests of the parties, a NCA should be accompanied with the following conditions:
- a NCA only for certain employees such as senior personnel, employees with high professional and technical qualifications, etc.
- a definition of a competitor or criteria to identify a competitor;
- time-limits and scope of work to the extent that employees are not allowed to work for a competitor;
- a coverage of confidential information;
- the benefits package for employees to comply with NCAs;
- amount of compensation if employees violate NCAs.
The clearer the content of NCAs, the more balanced the legitimate rights and interests of employers and employees will be. At that time, a fair NCA will have a higher chance of being accepted by the dispute settlement bodies.
[1] Clause 1 Article 35 Constitution 2013; Point a Clause 1 Article 5 Labor Code; Clause 6 Article 9 Law on Employment 2013.
[2] Based on the practice, a NCA is an agreement between the employee and the employer to prevent the employee from directly competing or working for a competitor during the implementation of the labor contract, especially after the termination of the labor contract.
[3] Point c Clause 1 Article 117 Civil Code 2015;
[4] See http://congbobanan.toaan.gov.vn/3ta161738t1cvn/ , last accessed on 26th July, 2021.