Our company provides our core talent, selected from among the staff of our research institute, the opportunity to study in the US for one to three years with support from the company through a study leave system. If they do not work for a certain period after their return, they have to repay the oversea training expenses in proportion to the remaining period of the three years. For workers who return to work after one year of study in the next month, we are assigning them to research and development work utilizing the company’s proprietary technology and offering a high salary. On the other hand, we are also going to add a clause that would prevent them from engaging in the same industry research and development work for two years if they resign for personal reasons. Also, considering such circumstances, an additional retirement allowance will be paid over what regular employees would receive. Would there be any issues with these under Korean labor law?
In principle, after an employee retires, the rights and obligations of the labor contract will disappear. In some cases, however, there can be rights and obligations remaining after resignation. This question essentially asks 1) whether the contract for the repayment of training expenses is valid, and 2) whether the non-compete contract is valid if the employee leaves the company.
First, an agreement on studying abroad with support from the company and repaying the expenses unless work for a certain period is provided can be a violation of Article 20 of the Labor Standards Act, which prohibits predetermination of penalty for breach of contract.
Precedent states that when the purpose of these arrangements are based on benefiting the employer for paying expenses for the study or training of employees and obligating the employee to repay all or part of the expenses actually incurred and exempt the repayment when the employees work for certain period of time, ① the necessity of such an arrangement must be recognized, ② his/her voluntary wishes and interests of the employee must be taken into account and the employer shall be deemed to have covered the cost of the training expenses, ③ the contract period and the expenses to be repaid are set within a reasonable and appropriate range. If these are true, then such an obligation can be deemed valid to the extent that it is not evaluated as forced labor.
In order to judge the validity of a non-compete agreement, the criteria looked at by the court are as follows: ① there is a benefit of the employer worthy of protection; ② the pre-retirement status of the worker; ③ the period for restrictions on employment, region, and target occupation, ④ whether or not compensation for workers is provided, ⑤ how the worker has resigned, ⑥ collective consideration of these items. In specific cases, there has been a tendency to compare and measure the employer’s interests worth protecting and disadvantages to the relevant workers. In the interests of the employer, in addition to trade secrets, knowledge or information that only the employer concerned has and that the employee has agreed not to disclose it to a third party, which may include customer lists or business trust. Disadvantages to relevant workers are mainly focused on scope of the industry and the period and area where the employment is restricted.