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As Vietnam positions itself as a preferred destination for high-tech oversea investment and cross-border technology transfer, ensuring legal safeguards for confidential information and trade secrets becomes paramount. Particularly for foreign-invested enterprises (FIEs), robust mechanisms like Non-Disclosure Agreements (NDAs) and Non-Compete Agreements (NCAs) are not just compliance tools but strategic necessities.
These agreements play a critical role in upholding investor confidence, especially in sectors where proprietary knowledge and innovation serve as competitive edges.
Vietnam’s Legal Framework: A Fragmented Landscape
Vietnam currently lacks a standalone regulation governing NCAs within labor relationships. Although Article 21.2 of the 2019 Labor Code acknowledges the employer’s right to require employees to maintain confidentiality during the term of employment, it does not explicitly regulate restrictions post-termination.
Article 19 of the Labor Code reinforces the right of workers to freely choose employment, which some courts have interpreted as grounds to reject post-employment non-compete clauses. Meanwhile, Article 84.3 of the 2005 Intellectual Property Law supports the protection of trade secrets, and Articles 45 and 46 of the 2018 Competition Law prohibit acts of misappropriating business information for unfair competition.
Despite these references, Vietnamese courts have offered contradictory interpretations. In some judgments, non-compete clauses have been ruled unenforceable due to their perceived infringement on constitutional rights to work. In others, when the clauses were clearly drafted, involved reasonable compensation, and targeted employees with access to confidential data, the courts upheld them as valid under civil contract principles. This divergence in judicial opinion creates legal uncertainty for employers seeking to enforce such agreements.
Common Legal Challenges for enterprises in Vietnam
- Absence of Clear Statutory Guidelines: Without a specific law on NCAs, enforceability relies on general civil contract principles under the Civil Code 2015.
- Conflicting Court Decisions: Vietnamese courts have historically oscillated between respecting freedom of employment (Art. 10 of the Labor Code) and validating voluntary, well-compensated civil agreements. For instance, in some rulings, courts have invalidated non-compete clauses on the basis that they infringe upon an employee’s constitutional right to freely choose employment after termination. In contrast, other cases have upheld these agreements when employers demonstrated clear evidence of trade secret access and provided fair compensation, often viewing them through the lens of civil autonomy rather than labor law strictures. This dichotomy reflects a judicial uncertainty that challenges both enforcement and compliance planning.
- Burden of Proof: Employers bear the responsibility of demonstrating the reasonableness of the agreement, its necessity, and that actual trade secrets were accessed and subsequently compromised.
- Lack of Judicial Precedent: Vietnam lacks a unified approach or established case law that consistently supports or invalidates such agreements, especially those embedded in labor contracts.
Practical Recommendations for enterprises including Foreign-Invested Companies
- Use Standalone Civil Agreements: Rather than embedding NCAs in the process of labor contract drafting, structure them as separate agreements (preferably combined with NDAs) to avoid labor law limitations.
- Target High-Risk Employees: Only require NCAs for senior staff or those with clear access to intellectual property or confidential data.
- Compensate Fairly: Offer explicit, reasonable compensation that reflects the scope and duration of the restriction.
- Define Scope Clearly: Limit duration (typically 6–12 months), geographic reach, and industry coverage to what is proportionate and necessary.
- Preserve Documentation: Retain training logs, access control records, and internal guidelines to support any future litigation.
Why This Matters for High-Tech and IP-Intensive Enterprises
As Vietnam strives to attract more high-tech investors and increase its innovation capacity, protecting proprietary knowledge becomes critical. Without enforceable mechanisms to restrict unfair post-employment competition, companies risk:
- Loss of IP and competitive advantage;
- Erosion of investor trust;
- Regulatory backlash or business disruption. Thus, NCAs and NDAs are no longer “nice-to-have” but core legal instruments.
Navigating non-compete and non-disclosure agreements in Vietnam requires not only legal foresight but also cultural and commercial pragmatism. For foreign-invested companies, a misstep could mean both reputational and operational damage.
ASL LAW has extensive experience advising on legal risk mitigation in Vietnam. ASL LAW has supported hundreds of businesses—both independently and in partnership with international law firms—by delivering service of contract consultancy with tailored, enforceable NDA and NCA frameworks that align with Vietnam’s legal landscape and global compliance standards.
ASL Law is a leading full-service and independent Vietnamese law firm made up of experienced and talented lawyers. ASL Law is ranked as the top tier Law Firm in Vietnam by Legal500, Asia Law, WTR, and Asia Business Law Journal. Based in both Hanoi and Ho Chi Minh City in Vietnam, the firm’s main purpose is to provide the most practical, efficient and lawful advice to its domestic and international clients. If we can be of assistance, please email to [email protected].
ASL LAW is the top-tier Vietnam law firm for Investment Services. If you need any advice, please contact us for further information or collaboration.
