Nowadays it is quite common to see non-competition clauses in employment contracts in Thailand as well as other clauses such as non-disclosure and non-solicitation. H&P Litigation Lawyers in Thailand see an increase of this kind of clauses in labor agreements by employers aiming not to lose “know How” or the time and money spent in training key employees.
In the opinion of H&P Lawyers, there are recent court rulings on this and jurisprudence that should be considered when it comes to assess the enforcement of this type of clauses in the contracts that can lead to litigation by companies. On this regard we have found three interesting court rulings that we would like to highlight as below:
Court Ruling No.1275/2543
The employment agreement between the plaintiff and the defendant stipulates that during the employment or within 5 years from the termination of the employment contract, the defendant must not work for a competitor in Thailand, Vietnam, Cambodia, Lao, Myanmar on the business of House moving.
The court considered that the condition is just a restriction prohibiting the career by clearly limiting the type of business. Not forbidden from doing a career off the way for the defendant is strictly prohibited and the defendant can have a career or work in a company about other products beyond the agreement.
Court Ruling No.3597/2561
The agreement prohibits work in competitors or not to work with any other company that operates the same business as the plaintiff. whether directly or indirectly within a period of 2 years from the termination of the employment contract.
The agreement did not cut off the occupation of the defendant completely. The defendant’s position has the opportunity to use the plaintiff’s trade secrets to use in the career. This may cause the plaintiff to lose commercial benefits. In addition, when taking into account all the interests of the plaintiff and the defendant. The limitation of the defendant’s right to occupation for a period of 2 years is effective.
Court Ruling No.3580/2561
The statutory agreement is simply a prohibition against competing occupations with employers, clearly limiting the type of business. Such an agreement is not to close the way of earning. Therefore, this clause is not contrary to public order or morality, as a result this clause is valid.
However, the limitation of rights for a period of 5 years from the date the employee is retired from being an employee. Considered to cause employees to be limited in their rights or freedom, causing them to bear more burden than expected as usual. Therefore, it is appropriate to be effective for only 1 year.
H&P legal comments and opinion
According to the court rulings of above, we can summarize that the clause of non-Competition restriction is valid in Kingdom of Thailand. However, such restriction shall not cut off the occupation of the employee completely. In the case of completed restriction from all kinds of work, this clause shall be invalid due to the contrary to the public order or morality.
The period of the restriction shall be considered case by case. Even the agreement stipulated exact years for restriction, the judge has the right to reduce to the appropriate period of restriction.
If you need legal advice on Labor Law and enforcement of Non-competition clauses, please contact our law firm in Thailand at [email protected]