The Boundary Reconstruction of Non-compete: From "Access to Secrets" to "Reasonable Proportion" of Judicial Review - Comments on Articles 13 to 15 of Interpretation (2)
Author | Lawyer Luo Yi
introduction
ZHIHENG
In recent years, due to the increasing mobility of the labor market and the increasingly fierce business competition, the non-compete clause has become the "standard" clause in the management of employment contracts of enterprises, and there has been a two-dimensional split in judicial practice. Enterprises hope to safeguard their core business interests through agreements, prevent technology leakage and customer outflow, while workers attach importance to the protection of professional development autonomy and fair employment rights.
In our country's judicial practice, when the court hears a non-compete dispute, it often takes "access to trade secrets" as the key criterion for judging the validity of the non-compete clause. Only when the employee truly obtains and grasps the trade secrets during the employment period can the non-compete clause have a legal basis. This practice exposes problems such as vague standards, difficulties in identification, and excessive reliance on the one-sided claims of the employer, resulting in a lack of uniformity in the judgment and the danger of the non-compete clause being alienated into an "instrumentalized" or "formatted" text.
In order to deal with the various difficulties encountered in the judicial practice of non-compete agreements, the "Interpretation of the Supreme People's Court on Several Issues concerning the Application of Law in the Trial of Labor Dispute Cases (II) " was promulgated and implemented in 2025. Articles 13 to 15 of it comprehensively optimized the conditions for application of non-compete clauses, the scope of reasonableness, and the economic compensation mechanism. The most iconic change is to break away from the traditional "trade secret contact" single way of identification and use the "principle of reasonable proportion" to implement comprehensive evaluation. It focuses on whether the limitation period, geographical scope, and business field meet the standards of prudence, and strictly reviews whether the employer has paid on time and in full Compensation costs, this change, not only for the judicial practice provides a clearer basis for review, but also for the employer's compliance management put forward higher requirements.
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"Interpretation (2) " thirteenthtoArticle 15of
Article analysis
Article 13 - Double Review Path for the Effectiveness of Non-compete Clauses
Article 13 states: "If the worker does not know or have access to the employer's trade secrets and confidential matters related to intellectual property rights, and the worker requests confirmation that the non-compete clause is not effective, the people's court shall support it according to law. If the content of the non-compete clause stipulated in the non-compete clause is not compatible with the trade secrets and confidential matters related to intellectual property rights that the worker knows and has access to, and the worker requests confirmation that the non-compete clause is invalid beyond a reasonable proportion, the people's court shall support it according to law.
Article 13 reconstructs the validity boundary of non-compete clauses from two levels:
(1) It is clear that "whether the worker knows or contacts trade secrets or confidential matters" is the premise for the establishment of the non-compete obligation;
(2) Introduce "reasonable proportion" review, allowing the court to exercise proportional control over the scope, territory, and duration of restrictions.
Article 13The crux of the matter is to determine the legal conditions for the entry into force of non-compete clauses, which require workers to "know and have access to the employer's trade secrets or confidential matters related to intellectual property rights."If this condition cannot be met, the worker can claim that the clause is invalid, which directly responds to the dispute in judicial practice about whether the non-compete restriction is based on the actual contact of the worker with trade secrets. The traditional view generally holds that the non-compete restriction is a means of protecting trade secrets, limited to employees who do have sensitive information, otherwise it will constitute excessive interference in the freedom of the worker to choose a job.
However, in practice, there are many difficulties with this standard: first, there is ambiguity in the definition of "access" and "knowledge", even if employees do not directly operate the core technical information, they may indirectly learn the core data because of the cooperative relationship; second, enterprises are at a disadvantage in the process of providing evidence, and the determination of trade secrets is relatively strict. If the specific contact situation of the worker is required to be proved in detail, the non-compete clause will become meaningless; third, the worker often claims to be exempt from the performance obligation on the grounds of "no contact with trade secrets" when leaving the job. If the court is too inclined to such a defense, it will lose the reality of the non-compete clause Operability, the provisions are useless.
Based on the above reality, although Article 13 does not explicitly adopt the position of "presumptive contact", it also provides a normative basis and discretionary space for the judicial practice of the obligation of non-competition for employees in specific positions.
In the provisions of Article 13The major breakthrough was the establishment of the principle of "reasonable proportions":Even if a worker does have access to trade secrets, if the restrictive clauses stipulated in the agreement clearly exceed the necessary limit, the worker can propose that the part exceeding the reasonable part is invalid and be ruled by the people's court according to law. This review method reflects the judicial authorities' further attention to the right to professional freedom of workers, and promotes the non-compete clause from simply emphasizing the protection of corporate interests to the modern legal track of balance of rights and proportional control.
Article 14 - Normative boundaries and compensation exceptions to non-competition on the job
Article 14 states: "If the employer and senior management, senior technical personnel, and other personnel with confidentiality obligations agree on a non-competition clause during the employment period, and the worker requests confirmation of the non-competition clause on the grounds that the non-competition clause during the employment period cannot be agreed or the economic compensation has not been paid, the people's court will not support it."
Article 14 makes it clear that even if the non-competition agreement signed by the employer with senior managers, senior technicians or other workers who have confidentiality obligations does not stipulate that the economic compensation or compensation standard is lower than the legal minimum standard, nor is it directly invalidated because of the worker's defense, the people's court shall not support the invalid claim of the worker that "no non-competition restrictions shall be agreed during the employment period" or "no compensation has been paid".
The purpose of this clause is to determineThe legal boundaries of post-employment non-competition restrictions require additional financial compensation to take effect, and during employment, based on the characteristics of the continuity of labor relations, the signed non-competition agreement can have legal effect without additional financial incentives. Its rationality lies in the fact that the worker has received corresponding consideration through normal wages and benefits, and the judiciary should not deny the validity of the agreement due to lack of additional compensation.
This provision goes furtherThe scope of application of on-the-job competition restrictions is definedIt is limited to senior managers, technical backbones, and other personnel in specific positions with confidentiality obligations. In other words, the setting of non-compete obligations must take the principle of necessity and job sensitivity as key factors to avoid the situation where the non-compete obligations expand indefinitely and harm the rights and interests of workers' career development.
From the perspective of system construction, Article 14 of the employment contract law clearly defines the scope of application of non-compete clauses.During the employment period, it is emphasized that obligations take precedence and restrictions are justifiable.After leaving the company, it will return to the proportional review and compensation mechanism.This article strengthens the process protection of the core interests of enterprises, and at the same time takes into account the hierarchical distinction and rationality control of the application of the provisions, providing a clear basis for judging disputes in practice.
Article 15 - Liability for Breach of Non-compete Obligations
Article 15 states: "If a worker violates a valid non-compete agreement and the employer requests the worker to return the economic compensation he has paid and pay liquidated damages in accordance with the agreement, the people's court shall support it according to law."
The clause stipulates the legal consequences of the worker's violation of the non-compete obligation. If the agreement is legal and valid, the employer can not only recover the economic compensation paid, but also require the worker to bear the liability for breach of contract. This strengthens the enforcement of the non-compete clause in the system and responds to the long-standing practical dilemma of "compensation has been paid but obligations have not been fulfilled" in practice.
Based on theoretical analysis, the non-compete system is essentially a burden contract with consideration obligations attached. Employers pay economic compensation to require workers not to engage in competitive activities for a certain period of time, thus establishing a mandatory legal binding relationship between the two parties. Under this framework, workers unilaterally violate non-compete clauses, which constitutes a fundamental violation of the main obligations of the contract. Article 15 establishes a "dual-track" liability mechanism for breach of contract: workers must not only return economic compensation for unjust enrichment, but also bear the liability for liquidated damages in the nature of damages, thus forming a complete legal liability system.
At the same time, a key point is that this clause regards "effective non-compete" as a key application element, emphasizing the importance of the legitimacy and rationality of the clause itself. If the non-compete clause has improper subject, unfair scope of restriction or non-fulfillment of compensation obligations, the court can first deny the validity of the clause, and then not support the employer's return claim and damage compensation claim.
Therefore, in the process of applying Article 15, the court will conduct a two-step review: first confirm whether the non-compete clause is valid, and then determine whether the worker constitutes a breach of contract.
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From rule clarity to practice loss:
The Internal Logic of Frequent Disputes on Non-compete Clauses
(1) Abuse of non-compete clauses by enterprises is widespread
In judicial practice, when enterprises sign employment contracts, they mostly use general non-compete clauses, lack personalized customization for specific job characteristics and responsibilities, and some employers force all employees to sign non-compete agreements. This "one size fits all" approach violates the "employment contract law". The basic principle that non-compete restrictions apply only to classified personnel, and cannot pass the court's legality review.
The fundamental purpose of non-compete is to prevent employees in high-risk positions from engaging in behaviors that harm the interests of the original employer with core trade secrets or key resources. Therefore, the premise of setting it should include factors such as the importance of the position, the sensitivity of the information contacted, and the cost of substitution. Blindly requiring all employees to sign non-compete clauses not only significantly limits the career development space of workers, but also calls into question the legitimacy of the system itself.
A warehousing case in Nanjing court is very typical. Liu Mouliang was previously an ordinary cold chef in a catering company in Nanjing, and after leaving his job, he entered another hotel to work as a chef. Although he signed an agreement with the former company containing a two-year non-compete clause, and promised to be liable for compensation if he violated the agreement, the agreement was ultimately ruled invalid because the previous company failed to fulfill the corresponding economic compensation obligations. The court held that the focus of the non-compete system is to protect the business secrets of enterprises and maintain the fair competition order in the market. Its scope of application should be strictly controlled in specific groups such as senior management personnel, core technical positions, and relevant classified personnel However, ordinary employees cannot be included in the scope of application.
(2) Low compensation standards or symbolic payments
Some enterprises have "symbolic compensation" or "delayed payment" when implementing non-compete restrictions, and even use blank contracts or verbal agreements to avoid formal agreements. The above practices are contrary to the principle of "necessity of compensation" stipulated in Article 24 of the Employment Contract Law. This clause states that during the non-compete period, the employer shall pay the corresponding economic compensation to the workers on a monthly basis, and the amount must meet the reasonable standards negotiated by both parties in advance. In the actual operation process, due to the pressure of cost control, the vast majority of enterprises set the compensation amount at "100 yuan level" or "5% of the basic salary", which is significantly lower than the "100 yuan level" or "5% of the basic salary" The actual income level of workers, and the long-term delinquency of payments after employees leave, in an attempt to achieve the purpose of "unilateral restraint without performing payment obligations", deviates from the principle of fairness.
In recent years, judicial review of non-compete agreements has been increasing. In a typical case issued by the Shanghai No. 1 Intermediate People's Court, the case involved a technical backbone who had worked in the core technology research and development department. The non-compete clause signed by the two parties stipulates that employees shall not engage in work in related industries within one year after leaving their jobs, and the unit shall pay 50% of their monthly salary before leaving their jobs.
If the employee violates his obligations, he should return the compensation paid and pay liquidated damages equivalent to 3 times the compensation (about 4.59 million yuan in total). In the second month of performance, the employee established a new company to engage in the same business, and the employer filed a lawsuit accordingly. During the trial, the court comprehensively considered the degree of confidentiality of the employee's original position, the ratio of compensation standard to salary level, the actual time of breach of contract and the nature of the behavior, and finally ordered him to return the compensation and appropriately reduce the liquidated damages to about 2.60 million yuan, which is about 57% of the original consideration and 1.7 times the total compensation due to him.
In this case, the compensation standard design is highly scientific and reasonable. In the judicial review process, the court fully considered elements such as "substantive compensation", "job relevance", "proportional balance", and reached a dynamic balance among various elements through systematic evaluation.
(3) "One size fits all" restrictions
The key to judging the reasonableness of the non-compete clause is whether the scope of the restriction is appropriate. When formulating the non-compete agreement, some enterprises, in order to achieve the purpose of "all-round coverage" and "complete prohibition", set similar clauses such as "cannot engage in relevant business nationwide" or "cannot join peer companies worldwide". The above clauses obviously go beyond the actual business needs, and essentially restrict the right of workers to choose jobs, and are invalidated by judicial organs because they violate the principle of proportionality.
In the (2018) Shanghai 01 Minzhi No. 1422 Tencent Technology (Shanghai) Co., Ltd. and Xu Zhenhua's non-compete dispute case, the Shanghai First Intermediate People's Court pointed out that setting the scope of restrictions in the non-compete clause is too wide, which does not necessarily lead to the invalidity of all the clauses, nor does it mean that workers can be completely exempted from the obligation to compete.
This view shows that when the court reviews the content of non-competition restrictions, it is more inclined to adopt a partially invalid and partially effective interpretation to balance the interests of enterprises and the rights of workers. In some industries, especially companies with a high degree of business segmentation, if the scope of non-competition restrictions is set too large, exceeding job responsibilities and actual market demand, there is still a risk of being rejected by the court.
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Non-compete clauses
Enterprise compliance design and risk prevention and control
(1) Strengthen job identification and standardize the scope of non-compete targets
The application object of the non-compete clause should be limited and should not be generalized to all employees. The essence of the non-compete system is to prevent workers from using sensitive information, customer resources or core technologies they come into contact with during their employment to form unfair competition with the original unit. Whether workers join a competitive company or engage in similar business during the non-compete restriction period is the key to determine whether they violate the non-compete obligation.
Therefore, when building the system, enterprises should adhere to the concept of "precise positioning, key prevention and control", consider factors such as job attributes, scope of authority, and degree of information contact according to the job classification model, and accurately identify specific job categories that need to implement non-compete restrictions. Generally speaking, senior managers, members of the core team of technology research and development, and responsible for important customer relationsSales personnel and other groups that are maintained are more likely to become the key regulatory objects of non-compete restrictions. Therefore, it is recommended that enterprises can formulate a "list of non-compete positions" on the basis of sorting out their own organizational structure and business processes, and update it in a timely manner in combination with job changes or strategic transformation, so as to ensure that the scope of constraints is always in line with the changing trend of latent risks.
(2) Enhance the effectiveness determination and refine the content of non-compete clauses
The evaluation of the legal validity of non-compete clauses should not only focus on the sensitive characteristics of the target position, but more importantly, whether the design of constraints is reasonable and standardized. When an employer formulates a non-compete agreement, it should integrate the characteristics of the industry and the sensitivity of the position. Reasonably define the scope of restrictions to ensure their operability and legality. In the setting of clauses, the model of "classified management + layer control" can be adopted. According to the importance of the position where the employee is located, the scope of information exposed to and the possible competition risks, scientifically set different restrictions, geographical restrictions and economic compensation standards. Article 24 of the employment contract law makes it clear that The maximum time should not exceed two years. In practice, technical researchers and senior management personnel can generally be set for 1.5 to 2 years. For ordinary employees, it is best not to exceed one year.
In response to the determination of the legal effect of geographical restrictions, judicial practice generally denies the legal basis of "national" or "global" restrictions, and tends to concretize them into an administrative region or business jurisdiction, such as "limited to *****su Province" or "limited to South China". In the limitation of business scope, it is recommended *****opt the normative model of "positive enumeration + miscellaneous provisions", listing key competitors and their core business areas, and then using general expressions to include other latent risk elements.
(3) Compensation cannot be "symbolic", compensation is linked to salary, and real consideration is ensured
In the non-compete system, compensation is not only related to the sense of security when the enterprise obtains the employee's professional restraint right, but also the benchmark for measuring the legitimacy of the right. In reality, although some employers have set up a non-compete compensation mechanism on the surface, the execution standard is low, often only a few hundred or even lower standards are set symbolically. This approach cannot offset the risk of career development loss and personal income reduction suffered by employees after restrictions. In recent years, judicial rulings have gradually focused on the "reasonableness of the consideration" review, mainly to hear whether the compensation amount given is in accordance with the law of fairness. If the compensation amount is significantly lower, the court is very likely to find that the clause violates fairness Principle, and then found invalid.
In order to enhance the legally binding nature of contract terms, enterprises can adopt a dynamic adjustment strategy, and determine the amount of economic compensation according to the average monthly salary level of employees during their employment, according to a certain proportion. Generally speaking, it should be between 30% and 50% of the monthly salary, which not only reflects the practical protection of workers' rights and interests, but also meets the judicial standard for "substantive compensation".
In the non-compete agreement, it is best to distribute the economic compensation in installments, and specify the key factors such as the amount, payment method, and time node in detail.
(4) Ensure the legality of compensation: sign confirmation and evidence retention
The legal effectiveness of a non-compete clause does not depend solely on whether its form is legal and reasonable, but more on the standardization and transparency of the enterprise in the implementation process. In many relevant judicial cases, the main reason why enterprises lose lawsuits is that they cannot provide official documents signed by employees or cannot effectively prove that financial compensation has been actually paid.
According to the current judicial and legal precedent, "agreement + consideration + performance" is the key factor to determine the obligation of non-compete. In order to prevent possible legal risks, enterprises should sign the clause when signing the employment contract, and the employee himself should sign and approve it. Properly keep the original stamped version as documentary evidence, so as to establish a complete legal protection system.
The payment of non-compete compensation should ensure that the procedures are formal and the information is open. It is best to use bank transfer or the company's internal financial system to implement it, and keep relevant supporting materials such as transaction vouchers, salary payment records, and employee signature confirmation.
conclusion
As a key mechanism for coordinating the employment autonomy of workers and the commercial interests of employers, the legal regulation and practical effect of the non-compete system have been in dynamic adjustment.
With the judicial review standard gradually tilted towards "reasonable restriction" and "proportional control", the function of this system has expanded from simply protecting trade secrets to creating a balanced framework between corporate rights and personal career choices. With the rapid development of the digital economy and the increasingly diverse labor market structure, improving relevant laws and regulations, standardizing economic compensation standards and establishing unified review rules will become a key way to promote the scientific development of the non-compete system. Only by continuously optimizing the application boundaries of non-compete clauses under the framework of the rule of law can we achieve substantive fairness in the law and healthy competition in the market.
author
brief introduction
Luo Yi
Consultant of Zhiheng (Haikou) Law Firm
Lawyer Luo Yi has both corporate executive and legal practice experience. He has worked in many well-known enterprises in investment, tourism, real estate and other industries. He has served as the head of human resources (HRVP) and general manager, and is deeply involved in the construction of corporate strategic decision-making and human resource planning system. His cross-border background enables him to accurately grasp the legal risks and compliance needs in corporate operations and provide full-cycle legal solutions for enterprises.
Now he is the executive director of China Human Resources Development Research Association, a member of China Law Society, and a director of China HRD Club. At the same time, he has served as a provincial vocational tutor of Hainan Provincial Employment Bureau, an expert committee of Hainan Vocational Guidance Association, and a referee of Hainan Provincial Class Skills Competition. He has been selected for the Hainan Provincial High-level Talent Program.
His professional contributions have been highly recognized by the industry, and he has been awarded the title of "Outstanding Person in Human Resources Development and Management of Chinese Enterprises".
Areas of expertise:
Dispute resolution, corporate compliance, legal counsel and enforcement, mainly focusing on civil and commercial dispute resolution, construction and real estate dispute resolution, labor disputes and industrial injury disputes, labor and personnel and corporate compliance management, non-performing assets and enforcement, including real estate, construction projects, commercial housing sales and other contract disputes; equity transfer, shareholder qualification confirmation, company dissolution and other corporate disputes; corporate compliance system construction, corporate internal investigation, cyber security and data compliance, labor law, labor and personnel disputes and industrial injury disputes.
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