When a sales director, head of R&D or chief technology officer leaves for a competitor, your ability to stop them taking know-how and customer lists depends almost entirely on whether you prepared the right NDA and NCA before the employment began. This article explains the difference between the two tools and the 4 conditions under which an NCA is likely to be recognised as valid.
- Business owners and CEOs
- HR directors and in-house legal teams
- Businesses with R&D, product formulas or valuable customer lists
Level: overview to in-depth. Based on: the Law on Intellectual Property; the 2013 Constitution; the 2019 Labour Code; court practice. Includes: NDA/NCA comparison; 4 conditions for a valid NCA.
Key points- Rights in a trade secret arise automatically. In a dispute, however, you must prove that you applied reasonable confidentiality measures.
- An NDA stops disclosure of information. An NCA stops work for a competitor. An NDA alone is not enough for senior staff.
- An NCA that imposes an absolute ban can easily be seen as infringing the right to freedom of employment and be declared invalid.
- An NCA is more likely to be recognised when it is separate from the employment contract, has a clear scope, provides fair compensation and is tied to a specific legitimate interest.
- An NDA should not list information that is already public as confidential, and it must be consistent with the work rules.
1. What is a trade secret, and how is it protected?
Trade secrets are one of the groups of intellectual property in which rights arise automatically, without registration. The trade-off is that, in a dispute, proving ownership and the scope of protection depends entirely on whether the business can show that it applied reasonable confidentiality measures.
There is no certificate to show
Unlike a trademark or an invention, a trade secret dispute rests only on evidence of the confidentiality process actually applied in practice.
Rules in the work rules
Confidentiality rules set out in the work rules (nội quy lao động) and clearly communicated to employees.
System access rights
Limits on who can access which information.
“Confidential” marking on documents
Documents that are confidential are clearly marked as such.
Signed confidentiality agreements
An NDA signed with each person who has access to the information.
2. NDA and NCA: two different tools that are often confused
NDA: confidentiality agreement
Creates an obligation not to disclose confidential information the person has accessed.
NCA: non-compete agreement
Creates an obligation not to work for a competitor or run a business in the same field, within a set scope and period.
3. The key legal issue: is an NCA lawful in Vietnam?
Still widely debated: draft with particular care
The 2013 Constitution and the 2019 Labour Code recognise the employee’s right to freely choose employment. A non-compete clause that imposes an absolute ban, without a basis in a legitimate interest that needs protection, can very easily be seen as infringing this right and be declared invalid.
However, court practice in Vietnam, including some precedents that have recognised non-compete agreements as independent, voluntary civil transactions between two parties with full legal capacity, shows that an NCA can be enforceable if it is designed correctly. The key point: the NCA should be treated as a separate civil agreement that protects a specific legitimate interest and provides fair compensation, rather than as a clause within the employment relationship.
4 key conditions for an NCA to be likely to be recognised as valid
Separate from the employment contract
When the employment contract ends, its clauses usually end with it. Make a separate agreement, as a civil transaction, so that it stays in force after the employment ends.
Clearly defined scope
Duration (usually not too long), geographical area, line of business and specific competitors. Without these, the agreement can easily be seen as too broad and unreasonable.
Fair compensation
Paid to the employee for the period in which their right to work is restricted. This is often the deciding factor in whether the agreement is seen as voluntary and balanced.
Tied to a specific legitimate interest
Trade secrets, technology secrets, customer lists. Not a general restriction on competition.
4. Practical points when drafting an NDA
Listing public information as “confidential”
This is not only pointless. It can also make the NDA look unreasonable and lead to it being declared partly or wholly invalid.
- List only information that is genuinely not public
Work rules and actual measures
Without confidentiality rules in the work rules, it is hard to prove that staff were told about their obligations.
- Add confidentiality rules to the work rules
- Combine with access rights and “confidential” marking
Define the information precisely
A definition such as “all information relating to the company” is more likely to be declared invalid in a dispute.
- List the specific categories of confidential information
5. Four contract tools to standardise together
| Tool | Purpose for intellectual property |
|---|---|
| NDA / NCA | Confidentiality of information; restricting competition after the employee leaves |
| BPA: business partnership agreement | Ownership of intellectual property created when working with outside parties |
| OA: outsourcing agreement | Ownership of intellectual property created by service providers |
| EC: employment contract | Transfer of intellectual property rights in what employees create in the course of their work, including after the contract ends |
Businesses that already have work rules should review the work rules and the individual NDAs and NCAs together to avoid conflicting terms. See the overall framework in IP management for businesses.
Draft a set of confidentiality contracts for senior staff with FC Legal lawyers
NDAs and NCAs designed to balance legal enforceability with what can realistically be negotiated with senior staff.
- NDA with a specific scope of confidential information
- NCA as a separate agreement, with a clear scope and compensation
- Consistent with your work rules and the IP clauses in employment contracts
Please do not send confidential documents or personal data through the form.
Sources: National Assembly, 2013 Constitution; National Assembly, 2019 Labour Code; National Assembly, Law on Intellectual Property, Civil Code and their implementing documents; courts, court practice and precedents on non-compete agreements.
This article is for reference. It is compiled from current labour and civil law and from court practice in Vietnam. This area is still widely debated in practice. Businesses should consult a lawyer before signing specific agreements.
Prepared by the FC Legal legal team and reviewed by FC Legal’s managing lawyer. Updated 30 September 2026.
