Keywords: competition law, restrictive covenants, employment contract, non-solicitation arrangements,
In the previous episode of this series, Mayer Brown JSM discussed the implication of non-solicitation arrangements with competitors. After mulling over what he has learned, Colin wonders if the Competition Ordinance would affect a very common aspect of his HR practice...
Colin: Would the Competition Ordinance affect the restrictive covenants in our employment contract with staff?
Mayer Brown JSM: The short answer to your question is "no". The Competition Ordinance will not affect the restrictive covenants in your employment contract with staff as long as they are reasonable, proportionate and necessary to protect your legitimate business interests, such as your trade secrets and client contacts.
A restrictive covenant that complies with employment law on restraints of trade will not fall foul of competition law.
In contrast, a non-solicitation agreement or arrangement between two or more competitors is a horizontal agreement. Except in the context of a proposed merger or acquisition of businesses, a non-solicitation agreement between competitors generally serves no legitimate business interest that requires protection by the law. A non-solicitation arrangement amongst competitors is usually an attempt to restrict the employees' job mobility and stabilise the employers' labour costs. This type of conduct is anti-competitive.
Colin: I see.
Originally published 2 December 2014
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