Non-competition agreements are common in the business world, especially in industries where companies compete for the same customers and market share. In the Philippines, non-compete agreements are legal and enforceable, but there are certain limitations that employers and employees should be aware of.
What is a non-competition agreement?
A non-competition agreement is a legally binding contract between an employer and employee that restricts the employee from working for a competing company or starting a competing business for a certain period of time after leaving the company. The purpose of a non-compete agreement is to protect the employer`s business interests, trade secrets, confidential information, and customer relationships.
Non-compete agreements in the Philippines
In the Philippines, non-compete agreements are recognized and enforceable under the Civil Code, Labor Code, and Supreme Court decisions. However, Philippine law sets certain conditions and limitations on non-compete agreements to prevent employers from unduly restricting an employee`s right to work and earn a living.
Under the Labor Code, non-compete agreements are only valid if they meet the following requirements:
1. The agreement must be in writing and signed by the employer and employee.
2. The restriction must be reasonable in terms of duration, geographical area, and scope of activity.
3. The employee must receive adequate consideration or compensation for the restriction.
4. The restriction must not violate public policy or morality.
5. The restriction must protect a legitimate business interest of the employer.
The Philippine Supreme Court has also clarified that non-compete agreements should be reasonable, necessary, and not contrary to public policy. For example, if the non-compete agreement is too broad in terms of duration, geographical scope, or type of work, it may be deemed unreasonable and unenforceable. Moreover, if the non-compete agreement prevents an employee from using his or her skills and experience in a lawful manner, it may be against public policy and therefore void.
What are the consequences of violating a non-competition agreement in the Philippines?
If an employee violates a non-compete agreement, the employer can file a complaint or lawsuit for breach of contract and seek damages or other remedies. However, Philippine law also recognizes the right of employees to work and earn a living, and employers must respect this right. Thus, if a non-compete agreement is deemed too restrictive or unreasonable, it may be null and void, and the employee may be free to pursue his or her profession or trade without incurring any liability.
Conclusion
Non-compete agreements are useful tools for employers to protect their business interests and prevent unfair competition. However, employers and employees should be aware of the limitations and requirements of non-compete agreements under Philippine law. Employers should draft non-compete agreements that are reasonable, necessary, and not contrary to public policy, while employees should carefully review the terms and conditions of such agreements before signing them. With the right balance of protection and flexibility, non-compete agreements can benefit both employers and employees in the Philippines.
