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Apr 26, 2011

Restrictive Covenants in Korean Employment Agreements and the Lawyers in Korea that Draft Them

The form agreements dished out by some Korean “legal experts” on employment law at many of the “ubiquitous” Korean “law firms” has led me to write, again, on this issue.

If a lawyer gives you a form labor agreement/employment separation agreement that does not consider the below, no need to fret, you are not alone – just move on. Most firms and attorneys in Korea are providing work product that is much lower in quality than the mediocre firms overseas and a good deal of the work is being performed by junior attorneys with little useful experience or education and little active guidance by experienced attorneys (i.e former judges, government attorneys etc.) As I noted in previous posts, only employ an attorney with Korean government experience.

I recently saw an employment separation agreement drafted by a self-proclaimed “top” law firm (also ranked in the ranking books- often these books are nothing more than bought advertising), that sold to a client a form agreement that showed a total lack of knowledge of Korea’s labor & employment law.
Many of these “firms” claim to be the biggest and best in Asia. Most are not law firms (loose associations of lawyers) and often have training programs developed by senior attorneys that focus only on profitability per junior lawyer (since they are not profitable with only their own few hours worked), but little care for legal ethics, professional development of junior attorneys and client success.

Sorry for venting, but too many law firms in Korea are engaging in acts that are making it difficult for dedicated lawyers and firms with transparent billing practices and a care for clients from maintaining their good reputations. I dread when a client starts a sentence “Korean law firms . . .” The client is usually correct, but small handful of other teams operate in a fashion similar to British & American law firms’ quality-focused practices.

If you are sold by the names on the firm’s letterhead in Korea– you have been duped. Most law firms of a size over a few dozen have the same connections and names as the firms with hundreds of lawyers. The small firms are more likely to use the connections for you– the biggest firms are unlikely to use them for anyone but themselves. Exceptions are sometimes made for clients that fork over barrels full of cash. The reality is that the biggest “ubiquitous” Korean law firms often worry more about their reputation than the clients’ businesses. That is a heck of a vent, but justified if you see what clients that come to my door have been put through by these firms.

Back to the post.

In general, to enforce restrictive covenants in Korean agreements concerning employment (i.e. employment separation agreements - a court will consider the “totality of the circumstances.” The court will consider factors such as:

1. If a benefit for the restriction was conferred on the employee in exchange for the restriction;
2. The seniority of the employee;
3. The scope of the agreement (i.e. temporal and geographic limit);
4. The past compliance of labor and employment laws;
5. The inferred (of course by court) purpose of the covenant.
Therefore, ensure that you get drafted an agreement, at a minimum, that:

1. Limits the scope to a specific geographic area, time period, product line etc.
2. Has a facial bargained-for-exchange. The restrictive covenant should be in exchange for a monetary amount. This may be drafted without providing “actual” additional compensation beyond the normal termination package;
3. Applies the agreement to the more senior employees or if applied to junior employee is carefully drafted to specifically detail the reasons for inclusion of more junior employee;
4. Makes the purpose of the restriction clear on its face.
These are not the only issues to consider, but is a good starting point in determining if you have hired the right counsel to draft your labor agreements. Labor & Employment Law is one, if not the most significant risk, facing foreign companies operating in Korea.

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Sean Hayes (NY Attorney-at-Law) leads the International Practice Group (IPG) at J & S Law Firm. Sean Hayes may be contacted at: SeanHayes@IPGLegal.com. J & S Law Firm's International Practice Group is headquartered in Seoul, Korea and has offices and/or affiliated firms in New York, Hong Kong, Sydney, Shenzhen and Washington DC. www.ipglegal.com