G. Post-employment restrictions

Frequency: ★☆☆☆☆

1. CONCEPT

Post-employment restrictions are obligations imposed by the employer on the employees after their employment, such as providing limitations on their next employment or any business activity within a certain period.

a. Test of reasonableness

Factors:

1) Whether the covenant protects a legitimate business interest of the employer;

2) Whether the covenant creates an undue burden on the employee; (c) whether the covenant is injurious to the public welfare;

3) Whether the time and territorial limitations contained in the covenant are reasonable; and

4) Whether the restraint is reasonable from the standpoint of public policy. (Rivera v. Solidbank Corporation, G.R. No. 163269, 19 April 2006)

b. Circumstances to be considered

The question of reasonableness of a restraint requires a thorough consideration of surrounding circumstances, including the subject matter of the contract, the purpose to be served, the determination of the parties, the extent of the restraint and the specialization of the business of the employer. The court has to consider whether its enforcement will be injurious to the public or cause undue hardships to the employee, and whether the restraint imposed is greater than necessary to protect the employer. Thus, the court must have before it evidence relating to the legitimate interests of the employer which might be protected in terms of time, space and the types of activity proscribed. (Ibid.)

c. Burden on employer

Respondent, as employer, is burdened to establish that a restrictive covenant barring an employee from accepting a competitive employment after retirement or resignation is not an unreasonable or oppressive, or in undue or unreasonable restraint of trade, thus, unenforceable for being repugnant to public policy. (Ibid.)

Cases involving contracts in restraint of trade are to be judged according to their circumstances, to wit: … There are two principal grounds on which the doctrine is founded that a contract in restraint of trade is void as against public policy. One is, the injury to the public by being deprived of the restricted party’s industry; and the other is, the injury to the party himself by being precluded from pursuing his occupation, and thus being prevented from supporting himself and his family. (Ibid.)

In cases where an employee assails a contract containing a provision prohibiting him or her from accepting competitive employment as against public policy, the employer has to adduce evidence to prove that the restriction is reasonable and not greater than necessary to protect the employer’s legitimate business interests. The restraint may not be unduly harsh or oppressive in curtailing the employee’s legitimate efforts to earn a livelihood and must be reasonable in light of sound public policy. (Ibid.)

2. EXAMPLES

a. Non-employment with direct competitor

Verily, the foregoing clause is not only clear and unambiguous in stating that the employee is barred to “work for whatsoever capacity… with any person whose business is in direct competition with [the employer] while [he is] employed and for a period of one year from date of [his] resignation or termination from the company,” it also expressly provided in no uncertain terms that should the employee “[breach] any term of [the employment contract], forms of compensation including commissions and incentives will be forfeited.” Here, the contracting parties – namely Babiano on one side, and CPI as represented by its COO-Vertical, John Victor R. Antonio, and Director for Planning and Controls, Jose Carlo R. Antonio, on the other – indisputably wanted the said clause to be effective even during the existence of the employer-employee relationship between Babiano and CPI, thereby indicating their intention to be bound by such clause by affixing their respective signatures to the employment contract. More significantly, as CPI’s Vice President for Sales, Babiano held a highly sensitive and confidential managerial position as he “was tasked, among others, to guarantee the achievement of agreed sales targets for a project and to ensure that his team has a qualified and competent manpower resources by conducting recruitment activities, training sessions, sales rallies, motivational activities, and evaluation programs.” Hence, to allow Babiano to freely move to direct competitors during and soon after his employment with CPI would make the latter’s trade secrets vulnerable to exposure, especially in a highly competitive marketing environment. As such, it is only reasonable that CPI and Babiano agree on such stipulation in the latter’s employment contract in order to afford a fair and reasonable protection to CPI. Indubitably, obligations arising from contracts, including employment contracts, have the force of law between the contracting parties and should be complied with in good faith. Corollary thereto, parties are bound by the stipulations, clauses, terms, and conditions they have agreed to, provided that these stipulations, clauses, terms, and conditions are not contrary to law, morals, public order or public policy, as in this case. (Century Properties, Inc. v. Concepcion, G.R. No. 220978, 05 July 2016)

b. Non-compete with same business

A post-retirement competitive employment restriction is designed to protect the employer against competition by former employees who may retire and obtain retirement or pension benefits and, at the same time, engage in competitive employment. (Rivera v. Solidbank Corporation, supra.)

Disclaimer: All information herein is for educational and general information only intended for those preparing for the bar exam. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

Share:

Mock Bar Exam Schedules

Test your knowledge. Practice answering questions, repeatedly and continuously — that’s how you prepare for the bar exam. Don’t mindlessly read throughout your bar exam review and expect you can effectively answer during your bar exam.

Mock Bar Exam: Civil Law I

The Mock Bar Exam (MBE) for Labor Law will simulate previous bar exam questions, including the time limit. The objective

Mock Bar Exam: Labor Law

The Mock Bar Exam (MBE) for Labor Law will simulate previous bar exam questions, including the time limit. The objective

Related: Labor Law

C. Productivity standards

Frequency: ★☆☆☆☆ 1. CONCEPT An employer is entitled to impose productivity standards for its employees, and the latter’s non-compliance therewith

Feedback

We value feedback.
Help us improve by with your suggestions and comments.
Thank you in advance

Syllabus-based

Reviewers

D. Collective bargaining

Frequency: ★★★★★ 1. Duty to bargain collectively, bargaining in bad faith Concept: Duty to Bargain Collectively. The duty to bargain

E. Discipline of members

Frequency: ★★☆☆☆ 1. Parliamentary (Internal) Rules Each House may determine the rules of its proceedings, punish its Members for disorderly

K. Voluntary arbitrator

Frequency: ★★★★★ 1. JURISDICTION a. Exclusive and original jurisdiction 1) Those arising from the implementation or interpretation of the CBA;

Updated

Suggested Answers

error: Content is protected.