I have been selected for a sales team leader position, but the company requires a commitment not to work for a competitor for two years after leaving the job; a violation would incur a penalty of 300 million VND.
I have just been hired as a sales team leader at an electronics distribution company, with a good salary and benefits package.
However, prior to signing the employment contract, the HR department has asked me to sign an additional commitment agreeing not to work for a direct competitor for two years following my departure, regardless of the reason for the contract's termination.
In the event of a breach, I would be liable for compensation of 300 million VND. The company explains that this measure is intended to protect customer data, pricing policies, and trade secrets to which I would have access during my employment.
I want to accept the job because it offers excellent growth opportunities, but I am concerned that if I leave later, I will be unable to continue working in the field where I have experience. If I refuse to sign, the company might withdraw the job offer.
May I ask if a company is permitted to require an employee to sign such a commitment at the time of hiring? What should I keep in mind before signing to ensure my future rights are protected?
Reader Van Linh
Employees have the right to freely choose their employment and workplace. However, for positions involving direct access to trade secrets or technological secrets, the law permits enterprises and employees to enter into written agreements regarding the protection of such information.
Article 21 of the 2019 Labor Code and Chapter II of Circular 10/2020 issued by the Ministry of Labor, Invalids and Social Affairs allow the parties to agree on the scope and duration of confidentiality obligations, the employee's benefits, and liability for compensation in the event of a breach.
The 2015 Civil Code also recognizes the freedom and voluntary nature of agreements, provided they do not violate legal prohibitions or contravene social ethics. Judicial practice has affirmed the legality of such agreements in Precedent No. 69/2023.
Therefore, a commitment not to work for a competitor after leaving a job is not automatically unlawful. However, before signing, employees should carefully review the extent of the restrictions and the benefits they will receive in return.
In this case, the company needs to clarify the definition of a "competitor" and which enterprises fall into this category, as well as specify the prohibited activities, the duration of the restriction, and the specific information deemed confidential and requiring protection.
In particular, the basis for the 300-million-VND compensation amount and the benefits the employee is entitled to during the two-year restriction period must be clearly defined.