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Restrictive Covenants — Geographic & Temporal Reasonableness Under UCTA Section 5
Former Employer (Plaintiff) v Former Employee (Defendant)
Composite summary — not a single reported case. This entry distils a settled line of Thai Supreme Court (Dika / ฎีกา) authority for legal education. It is not a transcript of one reported judgment, and the heading is not a citable case number. Do not cite it as specific case law — consult a Thai-qualified lawyer for the authoritative Dika number and current application.
Facts
An employee resigned from a Thai or multinational employer and joined a competitor. The employment contract contained a post-employment restrictive covenant prohibiting the employee from joining a competitor anywhere in Thailand (or, in some cases, anywhere in 'South-East Asia' or 'Asia-Pacific') for 2–5 years after termination. The former employer sued for an injunction and damages. The employee defended on the basis that the covenant was an unreasonable restraint of trade, unenforceable under Sections 5 and 12 of the Unfair Contract Terms Act B.E. 2540 (1997), and disproportionate to any legitimate business interest.
Legal Issue
Whether and to what extent post-employment non-compete and non-solicitation covenants are enforceable under Thai law, and what factors the court considers in assessing reasonableness.
Holding
The Supreme Court (Labour Division) has held that restrictive covenants are not per se unenforceable, but are subject to a reasonableness test under the Unfair Contract Terms Act B.E. 2540 (1997), Section 5 (covenant clauses giving an unfair advantage), Section 12 (modification of unfair terms), and the general principle of public order. The court considers: (i) the seniority and role of the employee — covenants are more readily enforced against senior executives, R&D personnel, and client-facing staff with genuine access to confidential information; (ii) the geographic scope — covenants limited to the territory where the employer actively trades are easier to defend than worldwide restraints; (iii) the temporal scope — 6–12 months is generally defensible; 2 years requires strong justification; covenants beyond 2 years are often modified downwards; (iv) the existence of consideration (continuing payment, lump sum) given for the restraint; and (v) the legitimate business interest protected (trade secrets, customer connections, investment in training). Unreasonable covenants are not struck down in full — the court may modify them to a reasonable scope under Section 5.
Reasoning
Section 5 UCTA empowers the court to modify (not merely strike) contractual terms that are unfair given the bargaining power and circumstances. Employment is paradigmatic of inequality of bargaining power. Reasonableness is assessed by reference to genuine employer interests, not abstract competition prevention. The 'blue-pencil' adjustment preserves enforceable elements while limiting overreach.
Significance
Determines the enforceability of a clause now standard in most senior Thai employment contracts. Particularly important to foreign-owned businesses transferred Western-style 'global non-competes' without local-law adjustment, and to executives weighing job offers from competitors.
Practical Takeaway
Draft restrictive covenants narrowly: senior roles only, the territory where the employer actually trades, 6–12 months in most cases, with explicit consideration paid for the restraint. As an employee, do not assume an aggressive covenant is automatically void — get advice before joining a competitor, and consider mediating an exit waiver.
Cited Statutes
- Unfair Contract Terms Act B.E. 2540 (1997), Sections 5, 12
- Civil and Commercial Code, Sections 150 (public order), 152 (severability)
- Trade Secrets Act B.E. 2545 (2002) (independent confidentiality protection)
This entry summarises a representative line of authority from the Thai Supreme Court (ฎีกา). It is intended for general legal education only and is not a substitute for advice from a Thai-qualified lawyer. Individual Dika case numbers are being verified against primary sources; until then these entries are presented as composite doctrinal summaries.
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