Chinese court clarifies validity of non-competes

A recent ‘typical disputes’ model case affirms the necessity of access to confidential information. 

HR Policy view: The Supreme People’s Court of China, in collaboration with the Ministry of Human Resources and Social Security, regularly issues notable examples of labour disputes.  Employers should give attention to these cases, as they reflect how the courts are interpreting employment law.  They serve as a consistent guide for the disparate provincial courts who often make individual interpretations in the settlement of disputes. 

Post-contractual non-compete agreements are legal in China.  Under PRC law, they are applicable to: 

In the recent ‘typical disputes case’ the employee, a security guard, was subjected to a non-competition clause, but the company failed to prove he accessed trade secrets, leading to the dismissal of the claim for damages. 

Many companies require employee to sign confidentiality agreements. In the past, more weight was given to the existence of confidentiality clauses or agreements (that is, employees captured under point 3 above).   However, this latest interpretation from the court focuses on whether an employee did in fact have access to trade secrets when evaluating non-compete agreements.   

Employer takeaways