萬國法律事務所

Scope of Territorial Effect of Non-Competion Clause May be Expanded In recent years, it has become increasingly common for foreign companies to utilize so-called headhunters to recruit high-tech professionals. In response, Taiwanese employers typically include non-compete stipulations after resignation clauses in employment contracts in order to protect their business secrets.

Taiwan's Ministry of Labor (MOL) recently issued an administrative rule explaining that ex-employees may be in breach such non-compete clauses where they perform activities at a new employer that compete with the original company, even when the ex-employee now works in a different department at a new company. Moreover, the geographic scope of competition prohibited may include territory in Taiwan and abroad. As long as there is substantial competition and the infringement of the original employer's commercial interests, is the ex-employee's actions will be deemed a breach of his/her non-competition clause. The geographic scope of protection for the original employer is not limited to the original employer's geographic area.

MOL explained that although the Enforcement Rules of the Labor Standards Act stipulate that the area of non-competition should be limited to the original employer's actual geographic scope of business activities, and the professional activities prohibited should be specifically clear and similar to the original scope of activities conducted by the ex-employee, the geographic scope of the non-competition can include territory in Taiwan and abroad, and will not be limited to the actual area where the original employer is located as long, as the ex-employee engages in substantial competition.

For example, if a Taiwanese company establishes factories in Vietnam and its employees are recruited by headhunters for a Cambodian factory, if the business activities of the ex-employee's position at the original employer's company and the new company overlap, there is a possibility that the ex-employee will be in violation of his/her non-completion agreement with the original employer.

MOL emphasized that whether the geographic area of the non-competition prohibition is reasonable should still be considered by the court in specific cases in response to international economic and trade practices.