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According to the first part of this article, the Non-Competition Against an Employer, is mentioned of the source of such prohibition owing to that an employer having its main purpose to protect of its trade secret from its close-relationship i.e. its employees, who may use of the employer’s trade secret by the nature of their works and divulge to a third party(s); especially, the employer’s competitor(s), which shall cause the severe-adverse-effect against the employer.  The author has fundamentally-analyzed the criteria in an employment agreement or a confidentiality agreement, which being prescribed as per the prohibition / restriction to an employee, by not to operate a business in a competitive manner against an employer, of to what extent that there shall be validly-effective.

Whilst under this part of the article, there shall be further narrated that upon an employer and an employee have agreed to execute an employment agreement and/or a confidentiality agreement and during the employment period of such employee, in the event that an employee has an opportunity to know of the employer’s trade secret, then going to work for an employer’s competitor at the same time or acting in an adverse-fashion against an employer, by operating a business in the same nature of an employer along with being employed and working for an employer.  Under this circumstance, how would it be under the law?

Nonetheless, by virtue of the Civil and Commercial Code, Re: the Employment, there be no law / provision that explicitly stipulated on the prohibition of an employee to operate a business in a competitive manner against an employer during its employment with an employer.  By the way, there be found in the event of being as a company’s director, which being stipulated under the Civil and Commercial Code, Section 1168 at the 3rd paragraph that:

“There be a prohibition / restriction of a director to operate a business in the same nature and being in a competitive manner against the company’s business, either for its own benefit / interest or for the other’s or being as an unlimited-liability-partner in a partnership, which operates business in the same nature and being in a competitive manner against the company without obtaining of a shareholder meeting’s approval.”  Hence in the event of an employee, whether or not, there be any covenant being prescribed to prohibit / restrict any of such actions? Whether or not, having any work rules prescribed of such prohibition / restriction?  If there be no covenant or work rules stipulated of such prohibition / restriction thereof, whether or not the employee’s actions under said circumstance shall be deemed to be illegal by virtue of an employment law and how?

According to the provision under a non-competition agreement against an employer, mostly there shall be prescribed to prohibit / restrict an employee, both during of its employment period and after its termination thereof for some certain period of time.  However, there be of an essence that such prohibition / restriction shall especially be prescribed to prohibit / restrict an employee, merely by not to operate a business in a competitive manner against an employer.  For instance, an employee assists to work to an employer’s competitor, which obviously be seen that such employee has breached of this agreement.  In contrast, in the event that an employee operates a business by its own, there shall be further considered that, whether or not, such employee’s business being compete against an employer?  Which shall be considered in a case by case basis.  For example, in the event that an employer has already prepared and sent-out a quotation to its customer, then said customer does not agree with said quotation.  Therefrom, an employee seeks this opportunity to quote of its private service at the lower price / rate, then said customer so agrees thereto.  Under this circumstance, the author kindly

opines that the employee’s action deems not to be regarded as a breach under this agreement, due to such customer has not agreed with the employer’s quotation.  Hence, the customer’ agreement to use of the employee’ service shall not be deemed as a predatory-pricing against the employer’s, due to knowing of the employer’s trade secret, which shall be deemed as a competition against an employer.

Despite of the employee’s action, which being not regarded as a breach under this agreement; however, if the employer’s work rules being stipulated of the prohibition / restriction to an employee, by not to bring any work to work during the employer’s working-hours or there be so called “a sideline-work”.  That may be deemed an employee is in breach, yet not to be to the extent of committing a severe-violation on such work rules.  On the contrary, if said employee works on its sideline-work off the employer’s working-hours; thereby, there be deemed not to violate any work rules hereof.  Anyhow, should such sideline-work being hostile against an employer, whether or not, an employee works thereof during or off the employer’s working-hours; for instance, an employee operates of its own business having identical business objective(s) to its employer.  Provided that such employee enters into as a shareholder and a director, then goes for a tender process and conducts a predatory-pricing against its employer etc.  Although, an employer and an employee have not executed of a non-competition agreement, there still be deemed that an employee intentionally-causes some damage against an employer.  Subsequently, an employer is entitled to terminate said employee without providing of any severance pay, then there is a fair dismissal.  Besides, an employer is also entitled to claim for damage(s) from the employee’s breach under the employment law.

The author has already mentioned in the event that an employee breaches against an employer during of its employment period.  However, under the frequent-incidents in the litigation scheme would be in the event that an employee has resigned from its employment, then goes to work for an employer’s competitor or operating of its own business in a competitive manner against an employer.  Whether or not under such events are considered as a breach or not, shall be depending upon a provision(s) under an agreement.  Due to an employer and an employee have no legal relationship in terms of an employment to each other.  Hence, should there be no provision(s) under an agreement prohibits / restricts thereto, an employee has not committed any breach thereunder and an employer could not claim for any damage from said employee.

In adjudicating a non-competition agreement against an employer shall be strictly-interpreted; for instance, the wording of “a business competition”.  The author kindly opines that not only considering on the company’s business objectives so registered, but also required to consider on the other factors e.g. the size of investment, targeted-customer, an employee’s business territory, which should be similar to the employer’ size to be considered as being competitive against said employer.  Owing to that should the employer’s targeted-customers who invest at the size of 100 Billion Baht and above; on the other hand, the employee’s business having its targeted-customers as SMEs.  Under said example, said employee may not be deemed to operate a business in a competitive manner against said employer somehow.

As per a claim for damage, from a breach of a non-competition agreement against an employer, is rarely to be proved to the court and being of an employer’s obligation to prove that such damage, which said employer so claimed, is a direct-impact from an employee’s breach as such.  Nonetheless, in the event that a customer does not purchase or use of an employer’s goods or service due to said customer, instead, purchases or uses of the employee’s goods or service.  For more obvious as such, a subpoena should be prepared to call said customer to provide a statement with the court.  Yet in practice, an employer may not bother its customer by calling…

said customer to be intertwined into this case because such customer benefits in purchasing of goods or service from such employee in the lower rate and may also provide some hostile-statement to such employer.  Furthermore, the subpoena of a customer into a litigation may enable such customer to know of the employer’s price on its goods or its service’s rate, which shall be of the employer’s trade secret.

By the way, an employer could solve this problem by designating penalty in an agreement, which enables such employer some compensation with ease.  Notwithstanding under the court proceeding, an employer still have its obligation to proof such damage to the court; whereby, not that such in-depth as compared to the proof of a claim for damage.  Owing to that the designation of penalty by the court towards an employer, such court shall consider on an employer’s all benefits / interests by law, not merely on the damage on the properties only.  In the event that an employer could proof to the court of the non-monetary damage, which is incurred against its business; thereby, the court could designate and grant of penalty to an employer, either as close as of what being prescribed under an agreement or in full thereof.

As per the employment’s court proceeding is quite lengthy and being obstructed and deemed boring to an employer.  Provided that once an employer has filed a lawsuit and whenever such lawsuit has not yet completed, the breach of a non-competition agreement against an employer is still underway; thereby, incurring continual-damage on an employer.  Under such event, an employer could request to the court for an interlocutory relief, which is the court’s order to a defendant to cease of such breach prior to the court’s judgment.

Consequently, the author is hoping that this article could facilitate a reader to be more understanding on the non-competition against an employer.  Anyhow, should a reader have any query related to the non-competition against an employer or other employment issues, please feel free to email to the author’s email address at worasetep@gmail.com.  The author is more than welcome to respond to your queries.

Author :  Mr. Worasete Phueksakon

Legal Consultant