Non-compete agreements, which restrict employees from joining competitors or starting similar businesses after leaving their jobs, must include economic compensation clauses to be legally enforceable.

Under Chinese law, employers and employees can agree to non-compete terms in their labor contracts or confidentiality agreements. These terms typically require employees to protect their former employer's trade secrets and intellectual property.

During the non-compete period, which cannot exceed two years, the employer is required to pay the employee monthly compensation.

Who is subject to non-compete agreements

Non-compete clauses apply only to senior management, senior technical personnel, and other employees with confidentiality obligations. The agreement's scope, geographical restrictions, and duration must be specified in the contract and comply with legal regulations.

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 their average monthly salary over 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.

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.

Source: Official WeChat account of the Ministry of Human Resources and Social Security at "rsbzwwx"