2026 Labor Law, Q9

Mahusay served as operations director of Telecall Philippines, Inc. (TPI), a subsidiary of Telecall, Inc., a U.S.-based company with call center operations across Asia and Latin America. Mahusay’s employment contract contains confidentiality and non-compete clauses prohibiting him in perpetuity from disclosing TPI’s confidential information and trade secrets to third parties without the company’s written consent. The contract further bars him from engaging in any business or employment that competes with Telecall in any country where the company operates. Mahusay resigned and was later hired by a rival call center company with operations in the Philippines and other parts of Asia. TPI threatened legal action, invoking the confidentiality and non-compete clauses. Are the confidentiality and non-compete clauses valid and enforceable under Philippine laws? Explain.

Quick check

Under Philippine jurisprudence, what are the essential requisites for a post-employment non-compete clause to be valid and enforceable?

Why is a confidentiality clause protecting company trade secrets valid even if it lacks a temporal limit?

Under Article 1306 of the Civil Code, why was the non-compete clause in Mahusay's employment contract declared void?

What doctrine renders post-employment covenants void if they impose blanket prohibitions that unduly deprive a person of their livelihood?

Choices available with full access.

Following his resignation, what are Mahusay's legal obligations regarding TPI's post-employment covenants?

Choices available with full access.

Unlock the full Labor Law answers

Learn more about these topics

1. Non-Compete Clauses
Under Article 1306 of the Civil Code, parties may stipulate post-employment restrictions provided they are not contrary to law, public order, or public policy. A non-compete clause is a post-employment covenant prohibiting a former employee from engaging in competitive business or employment after separation. To be valid and enforceable, a non-compete clause must contain reasonable limitations as to time, trade, and geographic territory. If a restrictive covenant lacks spatial or temporal boundaries, it is oppressive, unreasonable, and void for being an undue restraint of trade.

2. Confidentiality Clauses
Confidentiality and non-disclosure clauses protect an employer's proprietary trade secrets, technical formulas, and client records from unauthorized use or disclosure during and after employment. Unlike non-compete clauses, confidentiality covenants do not prohibit an employee from pursuing a chosen trade or earning a livelihood. Consequently, Philippine labor jurisprudence recognizes that a confidentiality agreement remains valid and enforceable even if it lacks temporal or territorial restrictions. Former employees remain legally bound to preserve company trade secrets in perpetuity to safeguard the employer's legitimate business interests.

3. Restraint of Trade
Philippine jurisdiction voids covenants in restraint of trade that inflict injury upon the public or unduly prejudice the employee. The doctrine rests on two grounds: depriving the public of the restricted party's industry and preventing the individual from pursuing an occupation to support themselves and their family. When evaluating restrictive covenants, courts balance the employer's need to protect legitimate business interests against the employee's right to earn a living. Blanket or perpetual prohibitions against competitive employment cross the threshold into unreasonable restraint of trade and are repugnant to public policy.

About these questions and answers
The questions reproduced here are the official texts of the Philippine Bar Examinations, published by the Supreme Court. They are reproduced for study purposes.The suggested answers are the author’s own.

They are not official answers, have no connection with the Supreme Court, the Office of the Bar Confidant, or any bar review institution, and are not endorsed by any of them. Official answer keys, where released, should be preferred over anything here.Nothing on this page is legal advice, and reading it creates no lawyer-client relationship. Do not rely on any suggested answer in an actual legal matter. Consult counsel on your own facts.Suggested answers reflect the law and jurisprudence the author considers applicable as of the date shown.

Where a question comes from an earlier examination, the suggested answer applies the law as it now stands, which may differ from the law in force when the question was given, and may therefore differ from what would have been the correct answer at that time. Where the difference is material, the answer notes it.The practice scoring feature measures wording overlap with the suggested answer. It is not a grade, carries no official weight, and says nothing about whether your reasoning is sound.Errors are possible. If you find one, please tell me and I will correct it.Last reviewed: October 2026