Can My Ex-Employee Join a Competitor? Debunking Non-Compete Myths in Hong Kong
It is the nightmare scenario for every startup founder and SME owner: Your star employee hands in their resignation. Two weeks later, you find out they haven’t just left—they’ve joined your biggest rival, and they might be taking your trade secrets and client list with them.
You rush to check their employment contract. There it is: the Non-Competition Clause. It says they cannot work for a competitor for 12 months. You feel safe.
But are you?
In Hong Kong, the law on “restrictive covenants” (the legal term for these clauses) is complex. It strikes a delicate balance between a company’s right to protect its business and an individual’s right to earn a living.
At TITUS, we help businesses navigate these growth hurdles. Today, let’s clear up the confusion and look at what actually makes these clauses enforceable.
The Golden Rule: “Reasonable and Necessary”
The starting point in Hong Kong law is that non-compete clauses are prima facie (on the face of it) unenforceable because they are considered a “restraint of trade.”
For a court to uphold your clause, the burden of proof is on you (the employer) to show two things:
- Legitimate Business Interest: You are protecting something tangible, like trade secrets, confidential information, or customer connections (not just trying to stop competition).
- Reasonableness: The restriction is no wider than necessary to protect that interest.
If your clause fails these tests, the court won’t fix it for you—they will likely strike it down entirely.
3 Common Misunderstandings About Non-Competes
There is a lot of “coffee shop legal advice” floating around Hong Kong. Let’s debunk the three biggest myths we hear from business owners.
Myth #1: “The clause is invalid unless I pay them during the restricted period.”
Fact: This is incorrect in Hong Kong, there is no statutory requirement to pay a former employee after they leave.
- However: While not required, paying the employee during the restricted period can help convince a judge that the enforcement of the restriction might cause less injustice to your Ex-Employee. But “No Pay” does not automatically mean “No Enforceability.”
Myth #2: “I must list the names of every specific competitor in the contract.”
Fact: This is incorrect and potentially dangerous. You do not need to list every competitor by name (e.g., “Cannot work for Company A, B, or C”). In fact, if you only list specific companies, you leave a loophole if a new competitor enters the market next month.
- Best Practice: Instead of a list, you should define a “Competitor” based on the nature of the business. (e.g., “Any company engaged in the business of digital marketing agency services within Hong Kong”).
Myth #3: “I can just copy-paste a standard 12-month restriction for everyone.”
Fact: This is the fastest way to get your contract thrown out of court. A “one-size-fits-all” approach rarely works. A 12-month ban might be reasonable for a CEO who had worked in your company for a decade with deep knowledge of the company’s 5-year strategy, but it is likely unreasonable for a junior sales executive.
- The Risk: If a court thinks 12 months is too long, they won’t revise the phrases in the clause for you. They will cancel the clause entirely, leaving you with zero protection.
The “Enforceability Checklist”
If you want your non-compete clause to hold up in court, it needs to pass the “Reasonableness Test” across three specific areas:
1. Duration (Time)
How long is the restriction?
- In General: 3 to 6 months is generally seen as reasonable for most roles in Hong Kong. For example, the life-cycles of trading strategies of a hedge fund manager would be around 6 months.
- High Risk: Anything over 6 months (e.g., 12 months) requires strong justification.
2. Geographical Scope (Location)
Where are they banned from working?
- Reasonable: The restriction should match where your business actually operates. If you are a local HK bakery, you cannot ban them from working in a bakery in London.
- High Risk: “Worldwide” bans are almost always unenforceable. It might be persuasive if you are a truly global multinational and your Ex-Employee had global responsibilities (but not APAC).
3. Scope of Activities (Role)
What jobs are they banned from doing?
- Reasonable: You can only stop them from doing a job that competes with you.
- High Risk: You generally cannot ban them from joining a competitor in a totally different capacity. For example, you can’t stop your Head of Sales from joining a competitor to work as a Janitor (as that poses no risk to your trade secrets).
The Bottom Line for Employers
Don’t rely on fear. A poorly drafted non-compete clause is a “paper tiger”—it looks scary, but it has no bite.
If you are worried about protecting your business, stop using templates downloaded from the internet. Tailor your contracts to attend to the seniority of the employee and the specific risks they pose to your business.
Protect your business the right way. At TITUS, we help you build a brand that attracts loyalty, but we also know that smart businesses protect their assets. Ensure your contracts are as strong as your brand.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Employment law in Hong Kong is fact-specific. You should consult with a qualified solicitor for advice regarding your specific employment contracts.