Non-Compete Clauses — When Your Contract Tries to Control Your Future

Non-Compete Clauses — When Your Contract Tries to Control Your Future

You signed an employment contract on day one of your career. You were fresh out of university, eager to get your foot in the door, and the salary was modest. Buried in the paperwork was a clause saying you couldn't join any competitor for two years after leaving. You signed without thinking twice. Years later, a better opportunity comes along and your old employer threatens to sue. Are you really stuck?

Not necessarily. The Hong Kong District Court decision in Moxie Communications Limited v Lai Cheuk Lok [2024] HKDC 1323 is a useful reminder that just because a restrictive covenant exists in your contract does not mean a court will enforce it.

In that case, a public relations agency tried to stop a former junior employee, who had joined the firm as a PR assistant on HK$10,000 a month, from working at another PR agency for two years and from contacting any of its clients or suppliers indefinitely. The court refused. Deputy District Judge Patrick Siu held that both the two-year non-compete and the non-solicitation covenant were unenforceable as restraints of trade. The plaintiff's case was dismissed in its entirety, with costs awarded against it on an indemnity basis.

Why the covenants failed

The starting position in Hong Kong is that post-employment restrictions are unenforceable unless the employer can show two things: a legitimate proprietary interest worth protecting, and that the restriction goes no further than is reasonably necessary to protect that interest. As the Court of Final Appeal made clear in PCCW-HKT Telephone Ltd v Aitken (2009) 12 HKCFAR 114, employers are not entitled to protect themselves against competition itself, only against unfair exploitation of genuine trade secrets or established customer connections. Trade secrets must also be identified with precision, not described in vague generalities.

In Moxie, the court found the employer had no real legitimate interest to protect. The "confidential information" relied on, mainly a press contact list, was largely public knowledge that any PR agency could compile or buy through services like Telum Media. The defendant was a junior employee with no influence over clients. The non-compete had no geographical limit, no industry limit (it banned working at any PR agency, not just fashion-focused ones), and lasted two years despite a one-month notice period. The non-solicitation clause had no time limit at all. Taken together, the restrictions were a blanket ban on competing rather than a targeted protection of legitimate assets.

What this means for you

If you signed restrictive covenants early in your career, take heart. Hong Kong courts look closely at whether the restriction is genuinely justified, with seniority, salary, duration, geography, and the actual nature of the protected interest all weighed in the balance. A clause that looks intimidating on paper may not survive judicial scrutiny.

Equally, if you are an employer drafting these clauses, broad and aggressive drafting can backfire. As Moxie shows, an unenforceable covenant offers no protection and can result in indemnity costs being awarded against you for pursuing a claim with no proper foundation.

Either way, the wording, scope, and timing of these clauses matter enormously, and the analysis is fact-sensitive. Before you assume you are bound, or before you sue to enforce, get proper advice.

Need legal help with an employment dispute or a restrictive covenant matter?
Jal N. Karbhari, Solicitors & Notary, we'll connect you with the right specialist.
Email: inquiries@karbharilaw.com
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Disclaimer: This article is for general informational purposes only and does not constitute legal advice or create a solicitor-client relationship. For advice tailored to your situation, please consult a qualified legal professional.