Why the non-competition term matters?


China Tips

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Art.23. the employer can put non-competition term in the contract and ask the employee to fulfill the non-competition duty after the contract is terminated.If the employee fails to fulfill it, the punishment will be placed on him or her.

Art.24. the non-competition duty can only be put on senior managers,technicians and other persons who have the duty to keep secret of the employer.

The non-competition period should be not more than 2 years after the contract ends and the employer should pay for the employee monthly for the latter to fulfill the duty.

——The Labour Contract Law of China

Mr.Zhao has worked in a training center as an accountant teacher. His monthly salary is 10,000 CNY.

A non-competition clause,which requires him not to provide service directly or indirectly for companies that compete with the employer, was put into the labour contract.If Mr.Zhao failed to fulfill the duty,he had to pay the employer 200,000CNY.

Both parties signed the non-disclosure and non-competition agreement in 2015. It said that,the non-competition period was two years. The employer should pay Mr.Zhao 2,300 CNY monthly for him to fulfill the duty,and the breach penalty is 24 times salary of the very month when Mr.Zhao resigns.

Mr.Zhao resigned in 2018,but the employer didn't pay him for the non-competition duty on the basis of the aforesaid agreement.

Later,the previous employer found that Mr.Zhao was teaching same course at another training center after resignation and he still used the logo of previous employer.

The previous employer then sued Mr.Zhao and asked him to pay the breach penalty.Mr.Zhao argued that,he didn't fall within the scope of the employees who should fulfill the non-competition duty and the previous employer hadn't paid him to fulfill the non-competition duty either.

The court supported the claim of his previous employer. It stated that,Mr.Zhao had breached the non-competition requirement for teaching at another training center with the teaching material of his previous employer.Therefore,he should compensate the latter.