Clause in employment contract- re not working for competitor

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Clause in employment contract- re not working for competitor

Postby Shawerma » 21 Apr 2010, 10:19

There was a clause in my employment contract in which I agreed not to work for a competitor for a period of two years after discontinuing employment with the company. During the signing of my contract, I felt immense pressure to sign everything at the time since I had already moved my family over from overseas and since I had told my other job options that I had decided against their offers.

My question is whether such a clause is legal. I have been told that this is not legal in the US. I have also been told that it is probably not legal in Taiwan but would like to know for sure.

I know that when someone quit recently, the company didn't even ask where he was going. In other words, they seem to know that the clause is not legal.

Would love to hear something more definitive. Thanks.
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Re: Clause in employment contract- re not working for competitor

Postby the chief » 21 Apr 2010, 10:35

Shawerma wrote:There was a clause in my employment contract in which I agreed not to work for a competitor for a period of two years after discontinuing employment with the company. During the signing of my contract, I felt immense pressure to sign everything at the time since I had already moved my family over from overseas and since I had told my other job options that I had decided against their offers.

My question is whether such a clause is legal. I have been told that this is not legal in the US. I have also been told that it is probably not legal in Taiwan but would like to know for sure.

I know that when someone quit recently, the company didn't even ask where he was going. In other words, they seem to know that the clause is not legal.

Would love to hear something more definitive. Thanks.


Well, for one thing, you signed it, so it doesn't really matter of it's "legal" or "illegal"
They can make you come to work every day in a pink freaking bunny suit if you agree to it, and you'll be in breach of contract if you don't.
The 2-year non-compete agreement is pretty common with big tech companies, but spottily enforced.
It's to stop you from going across the street to a competitor and giving them all your present company's knowledge base and/or IP.
Like most of these agreements, it's there just in case you misbehave, and then they'll have recourse, should they decide to do something about it.
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Re: Clause in employment contract- re not working for competitor

Postby Tiare » 21 Apr 2010, 10:35

There was a meeting with members of the CLA a few months back, and I asked the same question. Unfortunately, they didn't give a definitive response. They said that technically that kind of clause isn't allowed, unless you are paid some sort of compensation, but that once it's signed, then the company is allowed to try to take you through mediation or whatever if they want to. The guy did say that they probably wouldn't win without giving some kind of bonus upon you leaving the company (which they would have to prove), but he also said that there could be a slight chance of them winning, depending on the circumstances.
Honestly, I think most of the time these things are more scare tactics than anything else. I mean, unless you are giving away their "secrets" to a competitor (and they can prove it) I don't see what the problem would be. Just try to leave with as good a relationship with the company as you can. And don't tell them where you're going.
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Re: Clause in employment contract- re not working for competitor

Postby Edgar Allen » 21 Apr 2010, 10:37

My understanding is that in most jurisdictions this is not enforceable. Where it is enforceable 2 years would almost certainly be seen as excessive - unless you are remunerated for the lost opportunity to work for the competitor - i.e. they pay your salary for 2 years.

Of course proper legal advice would be ideal (and expensive) and in my experience will not give you a black and white answer.

The right thing to do is to work your notice as per your contract if you resign, and if you are made redundant to not work for a competitor for any period that you are paid in lieu of notice (usually known as gardening leave). In the 2nd scenario - dependent on how much money is at stake it may be worthwhile getting a lawyer to take a look.

I don't think the signing it under duress argument will work.
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Re: Clause in employment contract- re not working for competitor

Postby itakitez » 21 Apr 2010, 10:38

According to my understanding such contracts can be legal

Restrictive covenant

It al depends on "reasonable" - this is both geographical and time barred. So a 5 year period may be deemed excessive and worldwide would also be excessive.

see link

http://www.out-law.com/page-7086

The starting point for any such post-termination restriction is that it is void on the grounds of illegality. However, if the ex-employer can convince a court that the covenant is:

designed to protect his legitimate business interests; and
that it extends no further than is reasonably necessary to protect those interests
then it will be upheld and enforced.



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Re: Clause in employment contract- re not working for competitor

Postby Feiren » 21 Apr 2010, 10:45

Non-competes are enforceable in Taiwan but companies rarely want to spend the time and money to do it. One thing to watch for is whether there is a penalty clause--i.e. pay NT$1 million if you break the agreement. These give the agreements more teeth.
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Re: Clause in employment contract- re not working for competitor

Postby the chief » 21 Apr 2010, 10:55

Edgar Allen wrote:My understanding is that in most jurisdictions this is not enforceable. Where it is enforceable 2 years would almost certainly be seen as excessive - unless you are remunerated for the lost opportunity to work for the competitor - i.e. they pay your salary for 2 years.

Of course proper legal advice would be ideal (and expensive) and in my experience will not give you a black and white answer.

The right thing to do is to work your notice as per your contract if you resign, and if you are made redundant to not work for a competitor for any period that you are paid in lieu of notice (usually known as gardening leave). In the 2nd scenario - dependent on how much money is at stake it may be worthwhile getting a lawyer to take a look.

I don't think the signing it under duress argument will work.


You and I both know an American guy who just left a top-level gig at Apple in PD, he's got a 2-year non-compete restriction.
Maybe this kind of thing is more common in R&D/IP related fields so I've seen more of them.

Anyways, do you even have a job???
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Re: Clause in employment contract- re not working for competitor

Postby Feiren » 21 Apr 2010, 11:02

Very common in tech and becoming standard in financial services.
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Re: Clause in employment contract- re not working for competitor

Postby itakitez » 21 Apr 2010, 11:42

The other thing to watch would be the technical area and restrictions is may place on your new employer

There is a watch-maker case in Europe where the former employees (engineers) rounded up their knowledge and used this to form a new watch company and put a new watch on the market that was new-IP and did not infringe any IPR of the former company.

However, the court deemed that they had misappropriated the skill and development of the former company to get a product to the market quicker, with lower costs.

That's France for you though.

In the UK you can identify three types of knowledge.

1. Broadest - general skill in the art, such as how to keep a database or solder something, you cannot be prevented from practicing these by any agreement - freedom to work

2. Specific company skills - skills that the company has taught you, these can be covered by a restrictive covenent, such as the above, although this seems to have a 6month time bar and other picky clauses. This may be semi-known skills in the art or results of their investment in your training and your position in the company.

3. Company IPR/Trade Secrets - these are already covered without a specific contract and, depending on position, would cover all company secrets, such as company IPR, manufacturing methods, product line developments...

However, this is limited to position and "reasonably expected to perform" such duties. So a salesman for Tatong would not be limited from developing a new fan and opening a company for this, likewise an engineer in their software dept. would also be allowed to develop this tech, however, a GM/Director should be "loyal to the company" so would be barred, as would a project manager of cooling systems or even a fan engineer. However, anything youre not supposed to know may also be covered.
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Re: Clause in employment contract- re not working for competitor

Postby Feiren » 21 Apr 2010, 12:14

Much of this is relevant to Taiwan, but you are talking about French and UK law. Most employment agreements in Taiwan are governed by Taiwan law.

itakitez wrote:The other thing to watch would be the technical area and restrictions is may place on your new employer

There is a watch-maker case in Europe where the former employees (engineers) rounded up their knowledge and used this to form a new watch company and put a new watch on the market that was new-IP and did not infringe any IPR of the former company.

However, the court deemed that they had misappropriated the skill and development of the former company to get a product to the market quicker, with lower costs.

That's France for you though.

In the UK you can identify three types of knowledge.

1. Broadest - general skill in the art, such as how to keep a database or solder something, you cannot be prevented from practicing these by any agreement - freedom to work

2. Specific company skills - skills that the company has taught you, these can be covered by a restrictive covenent, such as the above, although this seems to have a 6month time bar and other picky clauses. This may be semi-known skills in the art or results of their investment in your training and your position in the company.

3. Company IPR/Trade Secrets - these are already covered without a specific contract and, depending on position, would cover all company secrets, such as company IPR, manufacturing methods, product line developments...

However, this is limited to position and "reasonably expected to perform" such duties. So a salesman for Tatong would not be limited from developing a new fan and opening a company for this, likewise an engineer in their software dept. would also be allowed to develop this tech, however, a GM/Director should be "loyal to the company" so would be barred, as would a project manager of cooling systems or even a fan engineer. However, anything youre not supposed to know may also be covered.
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