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? |
| Australia | 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. The assessment undertaken by Courts in determining whether a clause is enforceable is extensive and fact specific. |
| 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. |
| Hong Kong | 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. |
| Indonesia | The Indonesian laws are generally silent on this matter. In practice, Indonesian Courts will apply the concept of freedom of contract under which parties are free to agree to include non-compete obligations in a contract. The principles of enforceability of such provisions are however, largely untested in Indonesian courts. |
| 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. |
| Thailand | Yes, however only in circumstances where the employer can demonstrate that the post-employment non-compete provisions are fair and reasonable in the particular circumstances. The assessment undertaken by Courts in determining whether a clause is enforceable is extensive and fact specific but will generally include consideration of the geographic scope and length of the restriction and the employee's ability to work. |
Key contacts
Steve Bell
Managing Partner - Employment, Industrial Relations and Safety (Australia, Asia), Melbourne
Emma Rohsler
Regional Head of Practice (EMEA) - Employment Pensions and Incentives, Paris
Disclaimer
Herbert Smith Freehills LLP has a Formal Law Alliance (FLA) with Singapore law firm Prolegis LLC, which provides clients with access to Singapore law advice from Prolegis. The FLA in the name of Herbert Smith Freehills Prolegis allows the two firms to deliver a complementary and seamless legal service.