Samsung Electronics Pyeongtaek Campus (Image courtesy of Samsung Electronics)
SEOUL, Sept. 2 (Korea Bizwire) — With the semiconductor industry experiencing a boom leading to a vibrant job market, South Korean tech giants are facing a growing dilemma: how to prevent technology leaks while competing for top talent.
Industry leaders like Samsung Electronics and SK Hynix routinely require employees to sign non-compete agreements, typically barring them from joining rival firms for about two years after leaving.
However, these agreements, known locally as “non-competitive service pledges,” are increasingly viewed as toothless tigers in the face of fierce competition for skilled workers.
“These pledges are more about raising an individual’s awareness than having any real binding power,” said an industry insider who spoke on condition of anonymity due to the sensitivity of the topic.
“Pursuing legal action is extremely delicate, as it could be seen as infringing on an individual’s freedom of occupational choice.”
The ineffectiveness of these agreements has led to some peculiar practices. Some employees who switch companies reportedly use pseudonyms or English names and even change their phone numbers to avoid detection.
They may only reveal their real identities and attend company dinners after the non-compete period has expired.
Legal experts point out that even when companies do pursue litigation, the courts often side with employees.
In a landmark 2010 ruling, South Korea’s Supreme Court declared non-compete agreements invalid if they excessively restrict workers’ constitutional rights to freedom of occupation and work, or if they unduly limit free competition.
When damages are awarded, they are typically reduced by 30% to 80% from the amount claimed by companies. Moreover, courts generally recognize non-compete periods of only one to two years post-employment.
The situation is further complicated by the rapid pace of technological change in the semiconductor industry. Companies update their non-compete agreements annually to reflect current tech trends, but by the time a case reaches court — often years later — the disputed technology may already be obsolete.
This predicament puts South Korean chip manufacturers in a bind. On one hand, they need to protect their technological edge in a highly competitive global market. On the other, they must attract top talent to maintain their leading positions.
“Companies often turn a blind eye to non-compete violations because they’re all competing to bring in talent,” another industry source revealed. “The pledge-signing has become more of a formality than a legally binding process.”
Kevin Lee (kevinlee@koreabizwire.com)
