Our Mongolian lawyers were recently approached with a request to assist a client to confirm the legality of non-compete obligations under an employment contract for a mining services company.
Employer companies often ask whether they can oblige employee not to work in the company engaged in the similar type of activity or working after terminating an employment contract. This is regulated in the Labor Law of Mongolia as non-compete obligation under additional term of employment agreement.
In order to protect industrial and business secrets, an employer is given right to provide for an additional term in an employment contract or conclude a supplementary contract with employee creating non-compete obligations. Such agreements create an obligation for the departing employee not to work for a directly competing organization, or individual for a period of time after the termination of the employment relationship, or the employee himself/herself shall not engage in directly competitive activities.
The period of validity of additional non-competition clause or supplementary contract in the employment contract is not more than 1 year after the termination of the employee’s employment contract. After the termination of the employment, the employer shall pay the employee a monthly allowance in an amount equal to at least 50% of the last month’s salary during the period of validity of the additional non-competition clause or supplementary contract.
Meaning of last month’s salary is the salary that includes the base pay, additional pay, extra pay, annual leave pays and bonuses.