#39 Termination Labor Contract: When senior employees leave: How can businesses protect trade secrets and structure non-compete agreements?

Dear listeners, welcome back to The Lawyers Talk, the podcast channel of BLawyers Vietnam. I am Dang Thi Kim Chau, and it is my pleasure to join you again for today’s episode.

When terminating the employment of senior employees, key personnel, or managers, businesses must address more than termination procedures and final payments. A more significant concern is that these employees may have had years of access to customer data, pricing policies, business plans, and internal processes. Businesses should therefore prepare appropriate measures for confidentiality, data control, and post-employment competition.

A lengthy confidentiality agreement does not necessarily provide effective protection. Similarly, a non-compete clause imposing substantial compensation for breach may not necessarily be enforceable. If the protected information is not clearly identified, access is not properly controlled, and evidence of violations is not preserved, the business may remain vulnerable when a senior employee leaves.

So, what should businesses prepare when senior employees leave? In today’s podcast, BLawyers Vietnam will focus on 02 key questions:

1. First, what should a business do to protect confidential information during the termination process?
2. Second, how should a non-compete agreement be structured to improve its enforceability?

1. What should a business do to protect information when a senior employee leaves?

Senior employees, long-serving employees, key personnel and managers often have access to substantial amounts of important information, including customer data, pricing policies, business plans, technical processes, and other internal information. Accordingly, when the employment relationship ends, a business should implement appropriate information-protection measures rather than rely solely on a broadly worded confidentiality undertaking.

Under Labor Code 2019, a business may enter into a written agreement with an employee whose work directly relates to trade secrets or technological secrets, addressing the protected information, the protection period, the employee’s entitlements, and compensation for breach.

Because the relevant information, access rights, and employee roles vary from one business to another, the appropriate measures should be determined on a case-by-case basis. At a minimum, however, businesses should address the following 03 matters:

1. First, clearly identify the information to be protected and the employee’s obligations.
   A confidentiality agreement should clearly identify the categories of protected information, prohibited conduct, the confidentiality period, applicable exceptions, and liability for breach. A general provision stating that all information relating to the business is confidential may make it difficult to determine the scope of the obligation or prove a breach.
2. Second, control information and preserve evidence throughout the employment relationship.
   Businesses should implement measures such as access controls, confidential markings, restrictions on copying or transferring data, and access logs. These measures help prevent information leakage and provide a basis for demonstrating both the information accessed by the employee and the business’s genuine treatment of that information as confidential.
   Draft Precedent No. 33/2026 also indicates that a lack of evidence identifying the information used or disclosed may result in a business’s compensation claim being rejected. Although it has not been formally adopted as a precedent, the case illustrates that a confidentiality agreement may be difficult to enforce without appropriate information-management measures and supporting evidence.
3. Third, organize the handover and withdrawal of access rights under an appropriate plan.
   Before a managerial employee leaves, the business should prepare a specific handover checklist identifying the documents, equipment, data, accounts, and work contacts to be transferred; the designated recipients; the relevant deadlines; the method for confirming completion; and the handling of data stored on personal devices or accounts. The checklist should also cover the return or revocation of company seals, digital signatures, approval authority, access to bank accounts, representative authority, and registered positions.
   Access rights should be withdrawn at the appropriate time and in a manner proportionate to the relevant risk. If the labor contract remains in effect, the business should not automatically disable all email access or prevent the employee from continuing to work; instead, it should retain the access required for ongoing duties and the handover process.
   The termination agreement should also restate the confidentiality obligations that survive the employee’s departure, the obligation to return or delete data, confirmation that the handover has been completed, and liability for breach.

Not every employee departure requires the same set of measures. The appropriate approach will depend on the employee’s position, the information they hold, their access rights, and the business’s management systems. At a minimum, however, the business should: (i) clearly identify the information to be protected and the applicable confidentiality obligations; (ii) implement appropriate controls and preserve relevant evidence; and (iii) manage the handover, data handling, and withdrawal of access rights under an appropriate plan.

2. How should a non-compete mechanism be structured?

Under Labor Code 2019, a business may enter into a written agreement with an employee whose work directly relates to trade secrets or technological secrets, addressing the protected information, the protection period, the employee’s entitlements, and compensation for breach.

However, this provision does not establish a comprehensive framework for post-employment non-compete agreements. Current law does not clearly prescribe the permissible scope or duration of a restriction, compensation for the employee, or the conditions for enforceability. Accordingly, the legal effect of such agreements continues to be viewed from two perspectives: one emphasizes the protection of trade secrets and freedom of contract, while the other emphasizes the employee’s freedom to choose employment.

Case Precedent No. 69/2023/AL addresses the jurisdiction of commercial arbitration over disputes arising from confidentiality and non-compete agreements that are independent of employment contracts. However, it does not establish that all non-compete agreements are legally valid.

Draft Case Precedent No. 33/2026, which we refer to for informational purposes, reflects an approach under which an overly broad restriction on employment was not upheld. In the proposed case, the Court rejected the compensation claim because the relevant clause restricted the employee’s right to choose their employment, the employer failed to prove that the employee had used or disclosed confidential information, and the new employer was not an actual competitor. The key takeaway is that businesses should not assume that a signed non-compete clause will automatically be enforceable.

Given the lack of consistency in the law and judicial practice, businesses should not use the same agreement for every position. A properly designed non-compete agreement should address four questions:

1. First, to whom should the non-compete restriction apply?
   A non-compete agreement should apply only to employees who genuinely have access to trade secrets, technological secrets, or information that creates a competitive material advantage. A managerial title or long service alone should not justify restricting an employee’s right to work.
2. Second, what scope of restriction is reasonable and necessary?
   The agreement should specifically identify the competing activities or categories of competing businesses, restricted work or positions, geographic scope, duration, and applicable exceptions. A prohibition on working for “any competitor”, in any position and in any location, may exceed what is necessary and increase the risk that the clause will not be recognized.
3. Third, what benefits will the employee receive in return for complying with the agreement?
   A business should consider compensating the employee during the restriction period, considering the scope and duration of the restriction and its effect on the employee’s ability to find work. Liability for breach should also be proportionate and objectively determinable, rather than based solely on a large, fixed amount that is unrelated to the nature of the breach or the loss incurred.
4. Fourth, how will a breach be identified and addressed?
   The agreement should specify when the obligation begins and ends, how a breach will be identified, the dispute-resolution forum, and available remedies. If an employee joins another organization, the business should also assess the nature of the new role, the actual competitive relationship, and the likelihood that protected information may be used. Standing alone, the fact that an employee has joined another business may be insufficient to establish a breach.
   Businesses should also distinguish between confidentiality and non-compete obligations. A confidentiality obligation prevents an employee from using or disclosing information, whereas a non-compete restriction limits the work or business environment in which the employee may participate after departure. The two mechanisms may operate concurrently, but they are not interchangeable.

In summary, businesses should not rely solely on a lengthy restriction or substantial compensation amount. A non-compete agreement should be based on a legitimate interest requiring protection, a reasonable scope, a fair balance of interests, and a clear enforcement mechanism. Depending on the circumstances, a business should also review the employee’s position, the relevant industry, the competitive market, and the nature of the information concerned to determine whether additional provisions are required.

To conclude today’s discussion, let us briefly revisit some frequently asked questions: Are non-compete agreements with employees always upheld? No. Their enforceability depends on the terms of the agreement, the interests to be protected, the scope of the restriction, evidence of the breach, and the dispute resolution mechanism. Should businesses apply non-compete agreements to all employees? No. Such restrictions should only be considered for employees who genuinely have access to trade secrets, technological secrets, or information that provides a significant competitive advantage. Is signing a confidentiality agreement enough? No. Businesses should also manage access rights, maintain access logs, control documents, organize the handover process, and withdraw access rights appropriately.

We hope this information will help businesses proactively review their arrangements and mitigate risks from the outset.

If you have any questions, please leave a comment below. To learn more about BLawyers Vietnam, please visit our website using the link provided below this episode of The Lawyers Talk.

Thank you and see you again.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at info@blawyersvn.com. We would love to hear from you.

Date: 24 September 2026