ENFORCEMENT OF NON-COMPETITION AGREEMENTS IN VIETNAM: A LEGAL PERSPECTIVE

LexNovum Lawyers

29/06/2023

Non-competition agreements (NCAs) play a crucial role in protecting the legitimate business interests of employers in Vietnam. These agreements, also known as non-compete clauses or covenants not to compete, restrict employees from engaging in certain competitive activities during or after their employment. This article will delve into the enforcement of NCAs in Vietnam, shedding light on key legal considerations and providing insights into the process.

1.Legal Framework for NCA Enforcement: In Vietnam, the enforcement of NCAs is primarily governed by the Labor Code and other relevant regulations. While the Labor Code does not specifically address NCAs, it recognizes the right of employers to protect their legitimate interests, including trade secrets and customer relationships. However, the enforcement of NCAs must comply with certain legal requirements to be considered valid and enforceable.

2.Requirements for Valid NCAs: To ensure enforceability, NCAs in Vietnam must meet certain requirements, which include:

a. Written Agreement: NCAs must be in writing and signed by both the employer and the employee. Oral agreements or implied restrictions are generally not enforceable.

b. Reasonableness: NCAs must be reasonable in terms of their duration, geographical scope, and the activities prohibited. Excessive restrictions that go beyond what is necessary to protect the employer’s legitimate interests may be deemed unenforceable.

c. Consideration: NCAs typically require additional consideration provided to the employee, such as compensation, benefits, or specialized training, in exchange for agreeing to the restriction. This consideration ensures fairness and increases the likelihood of enforcement.

3.Requirements for Valid NCAs: The enforcement of NCAs in Vietnam involves several key steps:

a. Review and Drafting: Employers should carefully review and draft NCAs to ensure compliance with the legal requirements. It is advisable to seek legal assistance to ensure that the agreement is tailored to the specific circumstances and business needs.

b. Employee’s Understanding: It is essential to ensure that employees fully understand the terms and implications of the NCA before signing. Clear communication and transparency can help avoid potential disputes and increase the likelihood of enforcement.

c. Post-Employment Monitoring: Employers should actively monitor and gather evidence of any potential breaches of the NCA during the restricted period. This may involve conducting regular audits, collecting relevant information, and maintaining documentation to support any future enforcement actions.

d. Seeking Legal Remedies: If an employee violates the terms of the NCA, the employer may initiate legal proceedings to seek enforcement. This typically involves filing a lawsuit or arbitration proceedings to obtain injunctive relief, damages, or other appropriate remedies.

4.Challenges and Limitations: Enforcing NCAs in Vietnam may encounter certain challenges and limitations, such as:

a. Interpretation: The interpretation of NCAs and their enforceability may vary based on the specific circumstances and the court’s discretion. Clear and unambiguous language in the agreement can help minimize potential challenges.

b. Court Discretion: Courts in Vietnam have discretionary powers to modify or reject overly restrictive NCAs. The reasonableness of the restrictions, particularly in terms of duration and geographical scope, is a critical factor in the court’s decision-making process.

c. Burden of Proof: Employers bear the burden of proving that the NCA is reasonable, necessary, and that a breach has occurred. Sufficient evidence, documentation, and supporting materials are essential to strengthen the employer’s position.

Conclusion: Enforcing non-competition agreements in Vietnam requires careful adherence to legal requirements, reasonable restrictions, and proactive monitoring of compliance. Employers should seek professional legal advice when drafting NCAs and consider the specific circumstances and business needs to enhance the likelihood of successful enforcement. While challenges may arise, a well-drafted and properly executed NCA can be an effective tool to protect an employer’s legitimate business interests in Vietnam.

Why us: With over 12 years of experience in handling labor dispute resolutions between multinational corporations and high-level employees in Vietnam, Lawyer Nguyen Trung Hieu, LL.M. and LexNovum Lawyers have gained extensive exposure to and expertise in handling disputes related to NCA violations in arbitration bodies and courts. We can assist employers in reviewing internal procedures and regulations to ensure the effective implementation of NCAs while safeguarding the interests of both the business and the employees which will contribute to the development of a civilized and equitable working environment in Vietnam.