In practice, there are many cases where enterprises require employees not to work for rival companies when they have been out of work for a period of time for fear of disclosing business secrets. However, is this requirement legal in accordance with Vietnam’s regulations?
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According to Article 13 of the Labor Code 2019 of Vietnam, an employment contract is an agreement between an employee and an employer on a paid job, salary, working conditions, and the rights and obligations of each party in the labor relations. Before recruiting an employee, the employer shall enter into an employment contract with such employee.
According to Clause 2 Article 21 of the Labor Code 2019 of Vietnam, if the employees’ job is directly related to the business secret, technological know-how as prescribed by law, the employer has the rights to sign a written agreement with the employee on the content and duration of the protection of the business secret, technology know-how, and on the benefit and the compensation obligation in case of violation by the employee.
Thus, according to the above provisions, if the employees’ job is directly related to the business secret, technological know-how, employer has the rights to sign a written agreement with the employee on the content and duration of the protection of the business secret, technology know-how, and on the benefit and the compensation obligation in case of violation by the employee. However, in the terms of the agreement, the company must not ask that "the employee is not allowed to join an organization with similar business activities in case of resignation", which violates the law.
Specifically, according to Article 35 of the Constitution 2013 of Vietnam:
“Citizens have the right to work and to choose their occupations, employment and workplaces”
Concurrently, according to Clause 1 Article 19 of the Labor Code 2019 of Vietnam, an employee may enter into employment contracts with more than one employer:
“An employee may enter into employment contracts with more than one employer, provided that he/she fully performs all terms and conditions contained in the concluded contracts.”
Thus, there is no regulation that requires employees not to work for a rival company and in case the company adds a provision that requires employees not to join an organization with similar business activities, this provision will be invalidated. However, employees are obliged to protect business secrets and technology secrets of the company within the agreed period.
In other words, if in the signed agreement, it is clearly stated that within 24 months from the termination of the labor contract the employee is obliged to protect the company's business and technology secrets, the employee shall properly perform his/her obligations. In case the employee violates this agreement, the former company has the right to claim compensation for damage caused by the act of disclosing the business secret based on specific evidence and actual damages caused by this breach.
In short, according to the law, an employee has the right to work for a rival company when he/she has quit his job at the old company. However, the employee is obliged to protect the business secret and technology secret of that old company within the time limit agreed between the two parties when entering into the labor contract.
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- Labor Code 2019
