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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
A non-compete clause may cover both future employment and business.
A non-compete clause is a contractual stipulation whereby one party is prohibited from competing against the other contracting party in a similar activity for a certain period. It is valid as a post-employment restriction.
A non-compete clause may stipulate that the employee is prohibited from joining a direct competitor of the employer. It may also cover both future employment and business.
In terms of duration, the law does not set or prescribe a limitation on the duration. The only limitation imposed on non-compete clauses is that it should be reasonable in that industry or business.
The Supreme Court held in the case of Portillo v. Rudolf Lietz, Inc., G.R. No. 196539, October 10, 2012, pronounced that a non-compete clause, as in the “Goodwill Clause” referred to in the present case, with a stipulation that a violation thereof makes the employee liable to his former employer for liquidated damages, refers to post-employment relations of the parties.
In the same case, the Supreme Court held that the “Goodwill Clause” or the “Non-Compete Clause” is a contractual undertaking effective after the cessation of the employment relationship between the parties. In accordance with jurisprudence, breach of the undertaking is a civil law dispute, not a labor law case.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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