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

Under a non-compete agreement, the employee is restricted for a certain period after the employment ends from working for a competitor by producing or dealing with similar products, or from starting a business that engages in similar activities.

1. Who is subject to non-compete agreements

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

Note: Trade secrets include technical, business, and other commercial information that is not publicly known, has commercial value, and is protected by confidentiality measures implemented by the employer. Information that is considered general knowledge or industry practice and available from public sources does not qualify as a trade secret.

Where an employer 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 been exposed only to general operational information of the employer is not considered a person with a duty of confidentiality.

2. Compensation standards

The amount of economic compensation is determined by mutual agreement. If not explicitly stated, the law provides guidance. When a labor contract or confidentiality agreement includes a non-compete clause but does not specify compensation, the employer must pay the employee monthly compensation equal to 30 percent of the employee's average monthly salary for the 12 months preceding contract termination.

If this 30 percent is lower than the local minimum wage, the employer must pay at least the minimum wage.

3. Can non-compete economic compensation be included in regular wages?

After the labor contract is terminated or expires, the employer must pay the employee non-compete economic compensation in cash each month and in a timely manner during the non-compete period.

The employer may not refuse to pay non-compete compensation by claiming it is already part of the employee's regular wages or bonuses. If the employer does not provide the agreed-upon economic compensation during the non-compete period, the employee has the right to file a complaint with the human resources and social security department.

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

Article 23 of the Labor Contract Law of the People's Republic of China provides that, for an employee with a confidentiality obligation, 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. If the employee violates 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 to non-compete and economic compensation in the labor contract or a confidentiality agreement, and when the labor contract is terminated, unless otherwise agreed, the court shall support claims that the employer requires the employee to perform the non-compete obligation, or that the employee has performed the non-compete obligation and demands that the employer pay economic compensation.

5. Can employees terminate non-compete agreements if compensation is unpaid?

Yes. Under Chinese law, if an employer fails to pay compensation for three consecutive months after the termination of the labor contract, the employee has the right to terminate the non-compete agreement. Arbitration committees and courts support such requests.

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.

Updated Sept 22, 2026

Sources: Official WeChat account of the Shanghai Municipal Bureau of Human Resources and Social Security (ID: "shrsjwx"); official WeChat account of the Ministry of Human Resources and Social Security (ID: "rsbwwx")