New precedent confirming the validity of non-competition agreements in the context of employment relationships

On 1 October 2023, the Chief Justice of the Supreme People's Court issued Decision 364/QD-CA announcing seven precedents that have been approved by the Judicial Council of the Supreme People's Court. Among others, Precedent No. 69/2023/AL originates from the Decision of the People's Court of Ho Chi Minh City dated 12/6/2018, addressing the civil matter of “Petition for cancellation of arbitrators’ award”. 
The nature of this precedent involves a company entering into a non-competition and non-disclosure agreement with an employee. According to this agreement, the employee is prohibited from engaging in similar work or work that competes with the company for a specified period after the termination of the labor contract. Disputes are agreed to be resolved through commercial arbitration. 
When the company believed that the employee had breached the agreement, it appealed to the Vietnam International Arbitration Centre (VIAC) to settle the dispute. VIAC ruled in favor of the company, compelling the employee to provide compensation. Subsequently, the employee filed a petition with the People's Court of Ho Chi Minh City to cancel the VIAC award, arguing that the non-competition and non-disclosure agreement was invalid and that the dispute did not fall under the jurisdiction of commercial arbitration. 
The court determined that the non-competition and non-disclosure agreement was valid and distinct from the labor contract. Additionally, it ruled that the dispute fell within the jurisdiction of commercial arbitration. Consequently, the court rejected the employee's petition. 
The case is a recognized precedent, affirming the validity and enforceability of non-competition and non-disclosure agreements when meticulously composed. It's crucial to keep the agreement separate from the labor contract, thereby avoiding inclusion in the labor dispute resolution process, which notably lacks provisions for commercial arbitration.

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