11/23/2015

Enforcement of Covenants Not to Compete in Employment Agreements in Korea: Restrictive Covenants in Korea

It is getting easier for an employer to enforce non-compete restrictive covenants in employment agreements in Korea, because of recent judgments by lower Korean courts noting, among other things, the value of trade secrets in competitive industries in Korea.

Non-Compete Labor and Employment Lawyers in Korea
Korean Non-Compete Agreements
Recently, a interesting case, in a Seoul, Korean court, concerning the wedding planning business was handed down by the Seoul Central District Court (2104NA63529).  The Court upheld a three non-compete clause against an employee, but reduced a liquidated damage clause from KRW 1,000,000 per day to KRW 100,000 per day.

The relevant restrictive covenant noted that: "the Employee shall not work at another company in the same field for three years of termination of employment and the Employee shall pay indemnification of KRW 1,000,000 per day if this Agreement is breached by the Employee."  The business of the company was the wedding planning business.   The business is a very lucrative and very competitive business in Korea.  The employee had access to company trade secrets.

The Seoul Central District Court opined that: "if the agreement with the Non-Competition Restrictive Covenant restricts the employee's freedom of choosing a career and the right to employment, it is relevant to look to Civil Code 103: Contrary to Good Morals and other Social Order. If so, the agreement is invalid.  However, the Non-Competition Restrictive Covenant should be considered, comprehensively, including considering if valuable benefits were given, the period of the non-competition restriction and the type of occupation."

The Seoul Court opined that because of the nature of the wedding consulting business the trade secrets of the company are very important.  The Court, specifically, noted the client list is a very valuable trade secret that may be infringed when working for a competing business.

The Court, however, reduced the liquidated damage amount to KRW 1,000,000 per day to KRW 100,000 per day.  The Court noted that the Employee had an infrior barganing position and considered the amount of liquidated damages too high.

Please get an experienced and proactive Korean-based attorney experienced in employment law in Korea to review your employment agreements
.  The standard agreements we see are less than adequate.

Here are a few other articles on Korean labor & employment law that may be of interest to the reader:

Other articles that may be of interest:
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Sean Hayes may be contacted at: SeanHayes@ipglegal.com.

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw. Sean's profile may be found at: Sean C. Hayes