China Tightens Non-Compete Guidelines: Clarity, Limits, and Employer Action

HR Policy Global perspective: While non-compete agreements have been used in China for some time, their application has not always been consistent.  It is important for employers to review the recent detailed instructions issued by the Ministry, as they aim to create legally consistent non-compete agreements and will inform any future judicial disputes.  

In more detail

The guidelines* issued in September 2025 by the Ministry of Human Resources and Social Security (MOHRSS) “Guidelines for Corporate Implementation of Non-Compete Compliance” address long-standing concerns over the broad and sometimes arbitrary use of non-compete clauses. They aim to provide clarity on the scope and application of non-compete agreements, ensuring they are reasonable and enforceable.  The key features are:

Targeted Employees: Non-compete agreements should apply to senior management and key personnel with confidentiality duties, assessed individually based on their role and access to sensitive information.

Mandatory Compensation: Employers must offer fair compensation for non-compete clauses, proportionate to the employee's role, or risk the agreement being invalidated.

Reasonable Limits: Non-compete agreements should not exceed two years and must cover only areas where the employer has legitimate interests. Overly broad clauses may be invalid.

Clear Agreements: Agreements must be clearly written and agreed upon. Disputes should be resolved through negotiation or mediation, with legal action as a last resort.

Actions for Employers

• Review Existing Agreements: Employers should review their current non-compete agreements to ensure they comply with the new guidelines.
  
  
• Update Contracts: Contracts should be updated to reflect the clarified scope, compensation, and duration requirements.
  
  
• Training and Awareness: HR departments and legal teams should be trained on the new guidelines to ensure proper implementation and compliance.
  
  
• Monitoring and Enforcement: Employers should establish mechanisms to monitor compliance with non-compete agreements and address any violations promptly.

* Document provided is an English translation provided by a third-party organisation. Employers should rely on their own counsel.