Non-Compete Agreement · Restriction on Job Change
Non-compete Agreement
What is a non-compete agreement?
- A signature alone doesn't make it valid
- The narrower and more specific the roles, term, and territory, the likelier a court is to uphold it
- A restriction without compensation is hard to uphold
What a non-compete agreement really changes is not the thickness of the file but the direction of the burden of proof on the company. Getting a signature does not create a right; it creates a structure in which, once a dispute arises, the company must explain what it is protecting and why this particular person must be bound. So HR's job shifts from slipping one more page into the onboarding packet to keeping records of who had access to what information. Access logs, assigned client lists, and research notes should be in place before the agreement, and its strength depends not on the moment of signing but on whether those records exist.
In practice, three things need to be kept apart. A job-change ban that blocks employment at a competitor, a non-compete that stops someone from running a similar business directly, and confidentiality that bars use of information learned on the job differ in nature and in how far courts will enforce them. A period of around one year is the range that is at least arguable; beyond two years, the clause is often struck down entirely, or the court shortens the period and upholds only part of it. Compensation matters too, and "it is already included in the salary" does not satisfy it. To be persuasive, the company needs money documented as compensation for the non-compete restriction, such as a job-change ban allowance, special severance pay, or stock options. A preliminary injunction against changing jobs must be sought right after departure; if months slip by, the urgency that justifies one is the first thing to fall apart.
The most common mistake is invoking the agreement against someone the company pushed out first. If you try to block a move to a competitor after handling the exit through recommended resignation or restructuring, the case usually collapses on how the employment ended, and a single ruling denying the injunction signals to every remaining employee that “that agreement is void”. Setting a penalty at two or three times annual salary may seem like a strong deterrent, but an excessive penalty gets reduced, or becomes grounds to doubt the reasonableness of the whole agreement. Blanket signing is a risk, not protection. Keep in mind, too, that even if the non-compete fails, the confidentiality obligation and liability for trade-secret misappropriation remain separate. Each case is judged on its own facts, so we recommend legal review.
Eun-a ChoExpert in communication, stress management, career development, and millennial and Gen Z training
Jongmu KimSpecialist in corporate talent development and job-skills buildingIt is well-established case law that a non-compete agreement’s validity is judged as a whole, based on the employer’s protectable interest, the employee’s position, the duration, region, and occupations covered by the restriction, whether compensation was provided, and the circumstances of the departure.
Consider a hypothetical case. Company A makes industrial sensors, with 320 employees and annual revenue of about KRW 90 billion (≈ US$67,335,000). In the past two years, 7 key R&D and sales staff moved to three competitors. A preliminary injunction against one of them to bar re-employment was denied, which unsettled the company. The root of the problem was the agreement it had collected from every employee at hiring: '3 years, nationwide, any business in the same industry.'
- The HR director and the IT team cross-checked six months of design-server and customer-DB access logs. Only 41 of the 320 employees had actually touched core materials. The first report: "Collecting these from the other 279 only hurts us in court."
- Rewriting the agreement with outside counsel, they narrowed the term from three years to one, and the territory from nationwide to three named competitors and the same product lines. They also listed only two restricted roles: sensor design and key-account sales.
- The CFO created a post-employment non-compete allowance: 5% of monthly base pay as a separate line item for the 41 covered employees, plus one year's worth as a lump sum on departure. The average came to KRW 4.8 million (≈ US$3,590) per person, for a total annual cost of about KRW 140 million (≈ US$104,700).
- The confidentiality clause was split out of the non-compete document and signed separately with all 320 employees, with data-export logs reviewed once a month. Confidentiality survives even if the non-compete falls, which was the reason for separating them.
- Three of the 41 employees asked to re-sign refused. The HR director met with them personally to explain the allowance terms and the one-year period. Two signed, and the third was removed from the covered role.
- A year later, key-staff departures had fallen from 7 to 2, and the injunction filed in one of those cases was granted, limited to a one-year term and three named competitors. The covered headcount dropped from 320 to 40, but for the first time the agreement proved enforceable.