China Supreme Court Publishes New Judicial Interpretation on Competitive Restriction Clauses

(By Albert Chen) The system of competitive restriction is one of the major systems concerning the protection of trade secrets. In the beginning of 2013, the Supreme People’s Court of China (the “Supreme Court”) published its Interpretation IV on Several Issues concerning the Application of Law in Hearing Labor Disputes (the “Interpretation IV”). According to the new Interpretation, the rules related to the labor issue include: 1) a competitive restriction clause is valid when no article has been made regarding payment for the restriction; 2) removal of competitive competition due to delayed payment for the restriction compensation; 3) the employee may claim extra compensation when an employer terminates the restriction.