Does Engaging Employee liable for Non-Competition Constitute Infringement in China?

(By Yue Mengyan) An employee violates non-competition clause in his previous labor contract with his former employer, and works for a new employer, which has a competitive relationship with his former one. Could the former employer claim the new employer to be liable for such infringement, in addition to the employee’s liability for breach of contract? Pursuant to relevant laws and regulations in China, we will introduce a case and make our analysis in the following.

Case Introduction:

Appellant (defendant of first instance): Liu Guoqing


How Can the Double Wages Payment Provision be Misused In China?

(By You Yunting) In order to protect the legitimate rights and interests of laborers and to avoid enterprises failing to conclude a labor contract with laborers, China’s Labor Contract Law stipulates that, where an employing unit fails to conclude a written labor contract with a laborer that has provided labor services for more than one month but less than one year, it shall pay double wages payment to the laborer each month.

In practice, however, many enterprises found this stipulation being misused. To achieve double wages payment, some laborers intentionally failed to conclude the written labor contract with their employing units and then brought the employing units to labor arbitrations claiming for double wages payment. In our post, we would like to introduce a typical case where a laborer in charge of human resources who deliberately did not conclude a labor contract with its enterprise is supported by the courts to receive double wages payment after their departure. Foreign investors who do business in China should be aware of this potential labor risk.


How an Employer Terminates a Labor Contract with an Unqualified Laborer in China?

(By Luo Yanjie) Abstract: “where a laborer is unqualified for his work and remains unqualified even after receiving a training or an adjustment to another work post”, the employer may terminate a labor contract. The employer shall, if terminates a labor contract with an unqualified laborer, prove the employer to be incompetent from many aspects not just based on a bad performance.

Pursuant to the Labor Contract Law, there are many conditions for termination of a labor contract with laborers. Among these conditions, the most used one is that a labor is unqualified for his work. This means, the employer may not consider rescinding a labor contract unless a laborer is unqualified for his work. During the process of termination, among many disputes between laborers and employers, we would like to introduce a typical cases regarding termination of an unqualified laborer from Case Guidance of the Supreme People’s Court.


Essential points on Writing Noncompetition Clauses In a China Labor Contract

(By You Yunting) In today’s post, our website would like to introduce some essential points in writing noncompetition clauses in a labor contract in accordance with relevant Chinese laws and regulations. Pursuant to the Labor Law, the Labor Contract Law and related laws and regulations, combined with the specific conditions of employing units, when writing noncompetition clauses or agreements, we will pay particular attention to the following points:

I. How to determine the scope of the noncompetition clauses?


Should Chinese Enterprise Employees Who Have Not Signed An NDA Still Have A Duty to Not Disclose?


(By Albert Chen) In practice, we have seen numerous companies not signing any NDA or confidential clauses in employment contracts with their staff. But even so, taking into consideration confidentiality measures taken by a company, like making requirements for the handling of client information, and taking into consideration the confidential content of said information, one could easily conclude most companies intend to maintain nondisclosure of confidential information, and as a corollary staff and employees also maintain these efforts at nondisclosure.


What Information Could Be Considered as Trade Secret in Tech Product Transaction in China?


(By Albert Chen) The tech product transaction involves the information of technology and business. Among such information, to judge which part could be considered as trademark secret, it shall be based upon Article 10 of the Anti Unfair Competition Law, which regulates that to determine the trade secret, the court shall evaluate “whether it is known to the public”, “benefiting”, “practicability” and “confidentiality”.

Case Summary

In 1998, Shanghai Zhenxing Aluminum Co., Ltd. (the “Zhengxing Company”) developed a manufacturing technology, which the company used to produce articles. This technology created by Zhenxing set the standard for the production of the article. Shanghai Huikai Aluminum Co., Ltd. (the “Huikai Company”) was founded on September 10th 2003, and afterwards carried out the business in the same product manufacturing as Zhenxing. As investigated, among the 70 clients of Huikai, 68 once transacted with Zhenxing. For these clients, most products they purchased from Huikaiu were almost the same as those they bought from Zhenxing. Furthermore, Qin and Pan, who are now working in Huikai, are former employees of Zhenxing. During their employment with Zhenxing, the company signed confidential article in the labor contract and also an independent confidential agreement.


Should Employer Give Notice to Trade Union before Terminate Employment in China?

trade union

 (By Albert Chen) The dispute over employment termination is quite common in labor conflicts, and whether the employer shall send a notice to the trade union before the termination is commonly seen in such disputes. What then, are the regulations regarding this aspect in China?

I. What is the function of trade union in China?

The role of the trade union is specified in Article 2 of Trade Union Law of PRC (the “Trade Union Law”):

“Trade unions are mass organizations formed by the working classes of their own free will.


How to Respond Employees’ Compensation Claim for Office Relocation in China?

By You Yunting

A subscriber of our website asked that what the company shall reply when the employee hand in his/her resignation for the inconvenience occurred from relocation of the office and as for the employee’s claim of compensation.

We reply as follows: Obviously, it could come to the employee’s consideration that the relocation of the office is the statutory situation of “A major change in the objective circumstances relied upon at the time of conclusion of the employment contract renders it unperformable”, and it is also resulted by the employer, and for this reason, they would claim an extra one month salary and compensation.


Different Local Regulations on Compensations and the Effect of Non-competition Agreement

The system of noncompetition is regulated in China Labor Contract Law, “If a Employee has a confidentiality obligation, the Employer may agree with the Employee on competition restriction provisions in the employment contract or confidentiality agreement, and stipulate that the Employer shall pay financial compensation to the Employee on a monthly basis during the term of the competition restriction after the termination or ending of the employment contract.” By the article, a financial compensation is demanded for the conclusion of non-competition agreement, while no legal regulation on the effect of such articles when no compensation is paid. Therefore, on the issue, the adjudication or decision made by local courts or labor arbitration committee in China varies much, and today’s post is our analysis on it.