NON-COMPETE AGREEMENTS

(1) Definition of non-compete agreements

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When an employee leaves the company, the company often signs an agreement with the employees with a clause that "for a certain period of time, the employee will not compete with the company by working in the same industry or by starting a same type of business.” This is called a non-compete agreements.

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(2) Validity of non-compete agreements

As non-compete agreements conflict directly with the individual’s Constitutional right to choose one's employment and may directly affect the livelihood of the departing employee, often this type of agreements may not be found valid. In other words, even if a non-compete agreement was entered into between the company and the employee in an amicable manner without any irregularities involved, if the contract limits too excessively the employee's right to work or his right to choose an employment, it may constitute a violation of public order, rendering the contract invalid in part or in whole.

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When the court decides on the validity of a non-compete clause, it collectively considers factors such as benefit to the employer which deserves protection, the rank of the employee prior to termination, the time period, regions and occupations limited by the non-compete clause, any payments or benefits provided to the employee in exchange of such limitation, causes of employee's termination, public interests, and others. 

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Even where a non-compete agreement is (partially) found to be valid, except in special circumstances, the time period for non-competition are generally limited to six (6) months to one(1) year. The following cases have allowed for one (1) year of non-competition: Supreme Court Decision 2006Ma1303 rendered on March 29, 2007, Seoul High Court Decision 2006Ra746 rendered on October 13, 2006, Seoul Central District Court Decision 2013Kahap231 rendered on April 29, 2013.

However, it is worthy to note that in an extremely rare case, the court allowed a non-compete term of three (3) years considering factors such as the complexity level of technology and the difficulties of its development etc. (Seoul High Court Decision 2010Ra384 rendered on August 1, 2011).