Restraint of business clauses in employment contracts: experience from some countries

Abstract

Vietnam’s Labor Code enacted in 2012 officially stipulates a provision on non-disclose agreements in employment contracts. The application of this clause varies in practice and, in some cases, transforms into a restraint of business clauses in employment contracts. Judicial bodies in some labor dispute settlements accept these non-compete covenants whose hidden forms are even in non-disclose agreements. Many nations have long-time experience in solving this dilemma by imposing the existence of a clause of restraints of business in employment contracts with its proper conditions. This paper draws on such significant lessons to provide initial suggestions for Vietnam. In particular, apart from the clause of non-disclose agreements, there should be a clause of a non-compete in contract agreements, especially in selected fields for initially regulated durations. The application of such a clause should ensure transparency, fairness, and compensate for the restrictions imposed on employees. Most importantly, the recognized and stipulated approach should be reasonable and balance the interests of employers and their employees.