Post-employment non-compete clauses in Japan face tension with constitutional freedom of occupation (Art. 22(1)). Courts evaluate five factors: protectable business interest (trade secrets per Unfair Competition Prevention Act Art. 2(6)), employee's position (executives more restricted), geographic scope (nationwide bans disfavored), duration (1 year usually valid, 3+ years often void), and compensatory measures (monetary compensation for restriction). Clauses without consideration for the employee may violate public policy (Civil Code Art. 90). Remedies for violation include damages (requiring proof), injunction, and retirement benefit clawback.
Non-Compete Agreements in Japan: Validity and Enforceability After Resignation
Key Takeaways
- ✓Post-employment non-compete clauses are invalid without meeting five requirements
- ✓Overly long durations or broad geographic scope tend to render clauses invalid
- ✓Lack of compensation (such as enhanced severance) negates enforceability
- ✓Courts balance enforceability against freedom of occupational choice
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