Clause in employment contract- re not working for competitor

Work Permits, Employment Qualifications, Employer Problems
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Re: Clause in employment contract- re not working for competitor

Postby itakitez » 21 Apr 2010, 12:52

@feiren

I know, I thought I pointed that out. Regardless, I was just trying to give a brief rundown of terms and ideas, Im sure the law here is a hybrid of European/US practice so if he finds a legal expert on taiwanese law he will know some of the issues and roughly what is and isn't covered

also I was trying to add to the discussion and not being a taiwanese lawyer added some points for discussion/comparison for others who know to use

anyways, I would be very interested in knowing more about how these issues are legislated and governed in TW
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Re: Clause in employment contract- re not working for competitor

Postby Shawerma » 21 Apr 2010, 20:51

Well, the guy I talked to at work who doesn't think this is legal is sticking to his guns and gave me this to look at: http://www.leeandli.com/web/bulletin/artical.asp?id=1527

My Chinese reading comprehension is okay but very slow in some areas (like this one!). Basically, it seems to support the view that as long as you're not giving away trade secrets, IP, etc., such clauses are not enforceable.

Anyone better at reading legal documents in Chinese than I am?
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Re: Clause in employment contract- re not working for competitor

Postby Eiger John » 23 Apr 2010, 15:11

The Council of Labor Affairs has a set of guidelines that is often applied in the determination of whether a non-compete agreement is going to be valid. Last time I looked at them, they focused on: a) employee's position; b) scope of activities and geographic scope; c) reasonableness of the term; d) whether the former employer has a legal interest to be protected; e) whether the ex-employee has violated trust obligations to the prior employer; f) any compensation provided for such non-competition agreement.

Regarding the employee's position, the general sense is that low-level, secretarial-type positions should not be covered by non-competes as the overall policy objective is to protect against disclosure of confidential information/trade secrets to a competitor. But keep in mind that the CLA tends not to grant work permits to foreigners for low-level work, so this is likely not to be applicable.

Scope of activities and geographic scope -- idea is not to bar a former employee from being able to make a living of any kind.

Regarding reasonableness of the term, 2 years and under will normally be considered reasonable.

Regarding d, there ought to be a connection between the non-compete and the protection of some legit interest. And regarding e, one might be able to infer that in situations where there's something nefarious underway.

On f, that's not a complete requirement. Many employers will specifically state in their employment agreements that the compensation for the non-compete was factored into the employment compensation being given to the employee and that the employee agrees that the compensation thus received shall be deemed adequate. However, it is a factor within the guidelines, and it can certainly be considered.

Aside from non-competes, there's also a glorious range of other provisions one may run across -- non-solicits (don't call up our company's existing customer list) as well provisions aiming to keep ex-employees from going to work for the company's suppliers or customers.
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Article on enforcement of foreign court and arbitral decisions into Taiwan: http://goo.gl/hGXGG
Article on Cross-Strait intellectual property basics: http://goo.gl/ub4vA
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Re: Clause in employment contract- re not working for competitor

Postby Shawerma » 24 Apr 2010, 09:15

Eiger John wrote:The Council of Labor Affairs has a set of guidelines that is often applied in the determination of whether a non-compete agreement is going to be valid. Last time I looked at them, they focused on: a) employee's position; b) scope of activities and geographic scope; c) reasonableness of the term; d) whether the former employer has a legal interest to be protected; e) whether the ex-employee has violated trust obligations to the prior employer; f) any compensation provided for such non-competition agreement.


Thanks for that Eiger John. My initial impression after reading your post is that the guidelines are sufficiently vague so that an employer could at the very least make your life difficult if he/she wanted. If it is an employer's goal to make employees think twice before jumping ship and swimming over to a competitor, it seems like a non-compete clause in an employment contract is a good way to accomplish this in Taiwan!
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Re: Clause in employment contract- re not working for competitor

Postby redwagon » 24 Apr 2010, 13:56

Shawerma wrote:My initial impression after reading your post is that the guidelines are sufficiently vague so that an employer could at the very least make your life difficult if he/she wanted. If it is an employer's goal to make employees think twice before jumping ship and swimming over to a competitor, it seems like a non-compete clause in an employment contract is a good way to accomplish this in Taiwan!

Vagueness in regulation here is not an accident or incompetence, it's designed in so the rules can be applied at the discretion of whoever is judging the situation for his/her own advantage or the advantage of friends / those bribing him/her.
You are right that at most these very broad agreements do not stand up in court. Employers almost always get carried away with the scare tactics (and that's all they are), and go into unreasonable scope of time, location or job specifics. The question is only how vindictive is your employer and how much is he willing to spend to make your life harder.

I left a Taiwanese company some years back where I ran R&D. They tried to coerce me into staying by telling me they were going to get their lawyers to scare any prospective new employer out of hiring me. My research at the time said that their NCA was too broad in scope as it did not specify the area in which I was not allowed to take up a position, and the field of industry was also too broad. In the end I went to work in Europe so nothing came of it.

I think that as long as you don't take any trade secrets with you it will be fine. Let them waste their money on lawyers if they like but don't let them intimidate you.
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Re: Clause in employment contract- re not working for competitor

Postby Eiger John » 28 Apr 2010, 15:22

The vagueness of the guidelines does give some room for interpretation but also provides a checklist so that officials trying to apply a non-compete to a given situation can see what features they ought to look for.

I recall a particularly onerous and rather silly non-compete provision that provided for rather massive punitive damages -- about TWD 1 million -- for a secretarial position.

Which of course was pretty nuts, when you consider that most secretaries don't make that much in a year here and most folks wouldn't consider a secretary to be a prime candidate for using trade secrets. There's usually not a proprietary "secret" way of typing, faxing, and copying documents, nor is there usually a "secret" way of booking airline tickets, making lunch reservations, and keeping appointment schedules orderly.

But I digress... the guidelines factors are a useful way of seeing how one's own situation might be pigeonholed.
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Article on enforcement of foreign court and arbitral decisions into Taiwan: http://goo.gl/hGXGG
Article on Cross-Strait intellectual property basics: http://goo.gl/ub4vA
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Re: Clause in employment contract- re not working for compet

Postby marasan » 18 Jan 2011, 10:57

Here's a good article on this.
http://www.winklerpartners.com/a/features/no-compete-agreements.php

And here's something from the article that, if correct, would probably protect most of us:
The employee must receive consideration for his loss caused by agreeing to the non-compete clause. This should be in the form of a higher salary, stock option, or other forms of compensation specifically tied to the non-compete clause. It would be obviously unfair to require the employee to restrict his right to work without receiving something in exchange.
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Re: Clause in employment contract- re not working for compet

Postby Feiren » 18 Jan 2011, 11:04

But note Eiger John's comments above:

On f, that's not a complete requirement. Many employers will specifically state in their employment agreements that the compensation for the non-compete was factored into the employment compensation being given to the employee and that the employee agrees that the compensation thus received shall be deemed adequate. However, it is a factor within the guidelines, and it can certainly be considered.
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Re: Clause in employment contract- re not working for compet

Postby marasan » 18 Jan 2011, 11:40

Feiren wrote:But note Eiger John's comments above:

On f, that's not a complete requirement. Many employers will specifically state in their employment agreements that the compensation for the non-compete was factored into the employment compensation being given to the employee and that the employee agrees that the compensation thus received shall be deemed adequate. However, it is a factor within the guidelines, and it can certainly be considered.


So from Eiger John's comments I get the impression that most smart employers would have such a statement in their contracts (specifically tying compensation to the non-compete clause). Perhaps the smartest thing for anyone concerned about this would be to seek professional advice, making sure to bring a copy of your contract.
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Re: Clause in employment contract- re not working for compet

Postby baberenglish » 18 Jan 2011, 16:23

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.

My friend had that and ignored it...old boss took him to court demanding damages...a few hundred thousand NT...by the time the thing went to court my friend was finishing his one year contract and heading home anyways never to come back...his original plan. Some of the things in the contract may seem ridiculous but the golden rule is, if it is signed then in most cases it is binding, judge will just say "Why did you sign it then?"
As mentioned in other posts there are loop holes with each particular case but the precedents are few and far between.
If a red flag appears after reading a contract, then probably something is 'up'....
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