Dear Atty. Joji,
My contract states that for two years after leaving the company, I cannot work, directly or indirectly, for any business that competes with my employer or its customers, in any capacity whether permanent, consultancy, or temporary. I’ve been with my company for several years and hold a role that involves some level of leadership and industry knowledge. There are only a few competitors in the same field, and I’m now receiving potential opportunities from them. Is this non-compete enforceable?
Shahid
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Dear Shahid,
A non-compete clause is generally valid as a post-employment restriction. The Supreme Court has recognized that a non-compete clause, including one that imposes liquidated damages for any violation, is part of the parties’ post-employment relations (Portillo v. Lietz, G.R. No. 196539, 10 October 2012).
Although the law does not set a specific limit on the duration of such clauses, their enforceability ultimately depends on reasonableness. In practice, some restrictions apply only during employment, while others extend for one or two years, and in certain industries, even longer.
The employer, however, must be prepared to justify that the chosen period is reasonable based on the nature of the business. This is especially relevant in fields that rely heavily on confidential information or proprietary processes, such as research, development or pharmaceuticals, etc.
Moreover, non-compete clauses are generally enforceable and not automatically void. Instead, they must strike a balance: The restriction should protect the employer’s legitimate business interests without completely preventing the employee from pursuing their profession. When the clause becomes overly broad or excessively restrictive, it may be viewed as contrary to public policy.
In essence, non-compete clauses are enforceable, provided their terms are fair, balanced, and appropriate to the circumstances.
Hope this helps.
Atty. Joji Alonso