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What is the right resolution for a dispute over an NDA?

Dinh Quang Thuan

Lawyer Dinh Quang Thuan

thuan.dinh@phuoc-partners.com

The article titled: “What is the right resolution for a dispute over an NDA?” from Lawyer Dinh Quang Thuan, is published on Sai Gon economic times, dated 19 July 2018.

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As of 12-07-2018, the Saigon Times posted two articles about a dispute over a non-disclosure & non-competition agreement (NDA), with the two interesting articles written by lawyers with very distinct views.

For disputes over the NDA provision where employees are not allowed to work for competitors, over the past 10 years, courts have always ruled in favour of employees because they consider it unlawful to prevent resigning employees from working for other enterprises no matter whether they are competitors. Therefore, enterprises seem to accept the fact that the non-competition provision in the NDA is just to make it sound “technical” rather than help them to win against employees in a dispute. But this time, an NDA in dispute has created waves, with the hearing body ruling in an astounding fashion.

In the opinions of the author of the article posted in the Saigon Times titled “Non-competition provision in NDAs” by lawyer Nguyen Ngoc Bich, judgments in favour of enterprises in similar cases are obvious; that the court has refused to cancel the arbitral award (as in the said case) shows that courts no longer seem to side with employees in disputes over NDAs, even when they are brought to the court for settlement.

Thus does an NDA provide sufficient grounds towards the official application of a legal framework?

The author comments that the first thing is to clarify how Vietnamese law provides for NDAs. Pursuant to Article 23 of the applicable Labour Code, enterprises may enter into agreements with employees on the details and period of protection of trade secrets and technological know-how, rights and interests, and compensation in case of violations by employees. These agreements are interpreted as including the provision on “non-disclosure”, but whether they include “non-competition” is unclear since this has never been tested in the courts.

In short, the Labour Code does provide any clear protection ala “the employees are not allowed to work for competitors”, but in fact does allow employees the freedom to seek new employment opportunities.

So what about the Law on Intellectual Property? Article 84 provides that business secrets are protected if they are kept in confidence by the owner through the necessary measures so that such business secrets could not be disclosed and be easily inaccessible. However, not all corporate information is considered a business secret protected by the Law on Intellectual Property. Article 4.23 of the IP Law stipulates that business secrets must be the information obtained from financial and intellectual investment activities, and that it is not disclosed and likely to be used in business. Suppose an enterprise requires an employee sign an NDA, but the information described in the NDA is not considered a business secret, or the enterprise does not give employees any information that is considered confidential in accordance with Article 4.23 of the IP Law. Thus has the employee violated the NDA?

The writer referred to an arbitral award over a NDA dispute of this type, whereby an arbitrator identifies an employee as violating the NDA and the employee must compensate the employer for an amount worth one-year of an employee’s salary. An almost 6-page analysis of the ruling contains no line indicating whether all pieces of information described in the NDA are eligible to be treated as a business secret in accordance with the law, whether they are disclosed (at the time the employee allegedly violates the NDA) or whether they are likely to be used in business

Regarding the jurisdiction of the court and arbitrators, the comments by Lawyer Nguyen Ngoc Bich shows that he acknowledges the NDA from the labour law perspective during the period employees work for enterprises. However, he did not explain why the NDA changed the nature of the labour aspect to the commercial/civil aspect when employees resigned from their jobs. In regards to this issue, in the article titled “NDA Dispute: who voluntarily “lives under the yoke?” posted in Saigon Times, Lawyer Lac Duy said that the NDA-related dispute must be a labour dispute because it is an arising dispute over the rights, obligations and interests between the parties in the labour relationship as defined in Article 3 of the Labour Code.

Anyway, from different perspectives, it may lead to different ways to deal with a rather important and sensitive matter such as NDA, and the Supreme People’s Court should provide guidelines on the consistent application of the law