Non-Compete Clauses, Do They Hold Up?

November 22, 2023|Energy Jobs in Japan

Non-compete, non-scout, confidentiality and ‘garden leave’ clauses appear in employment contracts worldwide, and Japan is no exception. How valid are these clauses in the Japanese market? What can companies do to protect their trade secrets and confidential information? And should employees be concerned about having such clauses in their employment contracts?

Employee protection is favored

Generally speaking, employees in Japan are very well protected, and both laws and courts tend to lean toward protecting the rights of individuals rather than the company. This stance is also seen when looking at dismissals, Japan is a notoriously hard market to fire people and companies must take clear steps toward dismissal with a verifiable paper trail. This is the opposite of Taiwan, where typically courts will rule in favor of protecting company interests.

As the Japanese constitution gives individuals the right to choose their job and employer freely, it requires a very clear and well-structured case for a company to restrict an employee from working for a competitor once their employment is terminated.

According to a publication on the topic by Nishimura & Asahi (1), the company will need to prove a clear necessity to restrict an employee from joining a competitor to protect the company’s interests. Key points that are considered by a Japanese court will be:

  • Nature, specificity, validity and depth of the proprietary information/trade secrets that the employee has access to.
  • The position and seniority of the employee in question.
  •  ……….

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