A non-compete agreement refers to an agreement between an enterprise and an employee who has a duty to keep trade secrets confidential.

Under a non-compete agreement, for a certain period after the labor contract is terminated or expires, the employee shall not work for another enterprise that competes with the employer and produces or deals in similar products or engages in similar business, or start a business that produces or deals in similar products or engages in similar business.

Q: With whom can an enterprise sign a non-compete agreement?

A:

An enterprise may sign a non-compete agreement with senior management personnel and senior technical personnel who know trade secrets, as well as other personnel who have a duty of confidentiality.

Note:

Trade secrets refer to technical information, business information, and other commercial information that is not known to the public, has commercial value, and is subject to appropriate confidentiality measures taken by the enterprise.

Business information that falls under general knowledge or industry practice and can be obtained from public sources does not constitute a trade secret.

Where an enterprise enters into a non-compete agreement with other personnel who have a duty of confidentiality, it must inform them of the reasons in advance and specify the trade secrets that need to be kept confidential.

Note:

An individual who possesses only general industry knowledge and skills and has only been exposed to general operational information of the enterprise is not considered a person with a duty of confidentiality.

Q: Do employees still need to comply with a non-compete agreement after being dismissed?

A:

Article 23 of the Labor Contract Law of the People's Republic of China provides that, for an employee with a duty of confidentiality, the employer may include non-compete clauses in the labor contract or a confidentiality agreement. The employer may also agree to provide the employee with monthly economic compensation during the non-compete period after the labor contract is terminated or expires. Should the employee violate the agreement, they shall pay liquidated damages to the employer as stipulated in the contract.

Article 37 of a relevant judicial interpretation by the Supreme People's Court provides that, where the parties have agreed on non-compete and economic compensation in the labor contract or a confidentiality agreement, and when the labor contract is terminated, unless otherwise agreed, if the employer requires the employee to perform the non-compete obligation, or if the employee has performed the non-compete obligation and demands that the employer pay economic compensation, the people's court shall support such claims.

Q: Can non-compete economic compensation be included in regular wages?

A:

After the labor contract is terminated or expires, the enterprise must pay the employee non-compete economic compensation in monetary form every month and in a timely manner during the non-compete period.

The employer is not permitted to refuse to pay non-compete compensation on the basis that it is already included in the employee's regular wages or bonuses. If the enterprise fails to pay the agreed economic compensation during the non-compete period, the employee may file a complaint with the human resources and social security administrative department.

Disclaimer: This article is for general reference only and does not constitute legal advice. For specific cases, please consult the competent authorities or a qualified legal professional.

Source: Official WeChat account of the Ministry of Human Resources and Social Security (ID: "rsbwwx")