Contributed By Yoon & Yang LLC (Seoul - HQ)
Korean labour laws do not forbid or restrict non-solicitation clauses that prohibit former employees from soliciting other employees who remain employed with the former employer. Therefore, employers may include such non-solicitation provisions within their employment contracts, and require their employees to pay liquidated damages pursuant to Article 398 of the Civil Act for a breach of such an agreement. In addition to liquidated damages, employers may seek civil damages for breach of contract if the employer suffers ascertainable damages from the employee’s breach.
Non-solicitation clauses can also trigger issues regarding trade secret infringements under the Trade Secret Act. The Korean Supreme Court has held that, where a person who acquired technological information which qualifies as a trade secret moves to another company and attempts to disclose and use such trade secret at such other company, then such act constitutes violation of the confidentiality obligation under Article 2.3(D) of the Trade Secret Act. Further, the company that recruits such person is in violation of Article 2.3(A) for unlawfully acquiring a trade secret.
In such a case where a former employee and/or another company misappropriates trade secrets, a person (including employers) may request the court for a prohibition or preventive order against any person (including employees) who infringes or is likely to infringe trade secrets, if the business interest of the employer who possesses the trade secrets suffers damages or is likely to suffer damages due to such infringement (see Article 10(1) of the Trade Secret Act). Further, Article 11 of the Trade Secret Act provides that a person who damages the business interest of another person who possesses trade secrets through an intentional or negligent infringement of trade secrets is liable for compensation for such damages.
It is difficult to deem a former employee’s solicitation of their former employer’s customers as an infringement of trade secrets within the meaning of the Trade Secret Act.
However, the Korean labour laws do not forbid or otherwise restrict an employer from requiring its employees to sign an employment contract that includes a non-solicitation clause which prohibits those employees from soliciting the employer’s customers upon termination of the employment relationship. Further, as mentioned above, employers may require employees to pay liquidated damages, under Article 398 of the Civil Act, for breach of such non-solicitation clause. In addition to liquidated damages, employers may seek civil damages for breach of contract if the employer suffers ascertainable damages from the employee’s breach.