Dear Attorney,

I am seeking advice regarding a former employee who has violated the non-compete clause in their employment contract. After leaving the company, this individual began working for a competitor and, to my knowledge, has been actively encouraging current employees to apply for jobs at their new place of employment. This behavior is concerning as it undermines our workforce stability and may cause significant harm to the business.

Could you please advise on the legal remedies available under Philippine law for this breach of contract? Specifically, I would like to know what actions we can take to address the non-compete violation and how to approach the issue of employee solicitation.

Sincerely,
Concerned Employer

Insights:

Under Philippine law, non-compete clauses and restrictions on employee solicitation are enforceable to a certain extent but must adhere to strict legal standards. The principle of fair employment practices and the constitutional right to freedom of occupation means that non-compete clauses must be reasonable in scope, duration, and geographic coverage to be upheld by courts. Additionally, Philippine courts generally take a conservative view on enforcing non-compete clauses as they can impinge upon an individual’s right to earn a livelihood.

1. Non-Compete Clause Violation:

Non-compete clauses are typically included in employment contracts to prevent employees from working with direct competitors for a specified period after their employment ends. However, to enforce this clause, the employer must demonstrate that the restriction is reasonably necessary to protect the company's legitimate business interests, such as confidential information, trade secrets, or client relationships.

If the non-compete clause is excessively broad—such as restricting employment for an unreasonable duration or covering a vast geographical area—the courts may deem it invalid. For instance, a non-compete clause that bars an employee from working in the same industry for several years across the entire country would likely be struck down as overly restrictive. Conversely, a clause limiting employment within a specific region for a limited period, say six months to a year, could be seen as reasonable, especially if the employee had access to sensitive business information.

If the former employee has indeed breached a valid and enforceable non-compete agreement, you may have grounds to file a civil action for damages. The company can also seek an injunction to prevent further violations. The key here is demonstrating the reasonableness of the non-compete clause and the damage caused by the breach.

2. Solicitation of Current Employees:

The solicitation of current employees by a former employee working for a competitor can be seen as an unfair business practice and a violation of implied loyalty obligations, particularly if the employment contract explicitly prohibits such conduct. This is often referred to as "employee poaching," and, if proven, may further strengthen your case for damages.

Philippine courts have ruled that solicitation clauses are valid, provided they, like non-compete clauses, are reasonable. If an ex-employee actively encourages other employees to join their new company, you can claim a breach of contract if such actions were explicitly forbidden in the original agreement. The company can pursue legal remedies, including seeking compensation for any loss of business or productivity resulting from employee departures.

3. Next Steps:

To address this issue, you may want to take the following actions:

Review the employment contract: Ensure that the non-compete and anti-solicitation clauses are clearly outlined, reasonable, and enforceable under Philippine law.
Gather evidence: Document instances of the former employee's solicitation efforts, such as communications or testimonials from current employees who have been approached. This evidence will be critical if the case goes to court.
Send a cease-and-desist letter: Before initiating formal legal proceedings, consider sending a cease-and-desist letter to the former employee, warning them of the contractual breach and demanding that they stop soliciting your employees or working for a competitor. This step may resolve the issue without needing to escalate to litigation.
Pursue legal action: If the cease-and-desist letter is ignored, or if the damage to the company is substantial, you may file a civil lawsuit for damages and seek an injunction to prevent further solicitation or non-compete violations.

It is essential to consult with legal counsel to assess the enforceability of the specific clauses in the employment contract and to explore the most effective course of action. Philippine courts will scrutinize the reasonableness of the restrictions imposed on employees and weigh them against the individual’s right to seek gainful employment. Therefore, careful consideration of the facts and proper legal strategy is necessary for a successful outcome.