Restrictions on Competition Cannot Be Abused

Wu Xue'an

"After signing a non-compete agreement, I felt like I was being 'blacklisted' by the entire industry." Liu Peng, who works for an internet company in Beijing, had originally planned to switch jobs at the end of the year. However, after reviewing the non-compete agreement he signed when he first joined the company, the dense restrictions made him think twice. As a result, he sought media attention to vent his frustrations. There are many similar cases like this. This shows that in recent years, non-compete agreements have gradually become abused and generalized, with unclear or arbitrarily expanded scope involving multiple industries and companies.

What is known as a non-compete agreement refers to the provision in labor contract law that allows employers to agree with employees who have confidentiality obligations not to compete with the employer during their employment period. The employer can also specify the compensation period and amount if an employee violates this agreement after the labor contract ends. If an employee fails to comply with the non-compete agreement, they must pay a penalty to the employer according to the agreement.

In reality, there are often cases where employees leave their current company and start a similar business that becomes a competitor; or sales staff resign and then join another company in the same industry, using unfair practices to harm their former employer's interests. As a result, many employers have chosen to sign confidentiality agreements and non-compete agreements with employees to protect their commercial secrets.

Although labor contract law stipulates that "employees who have confidentiality obligations may agree not to compete with the employer during their employment period," it also clearly states that "the scope of non-competition shall be limited to senior management, high-level technical personnel, and other employees with confidentiality obligations." If these employees violate the non-compete agreement, they must pay a penalty to the employer. Who would have thought that some companies, training institutions, or even ordinary employees are now using "non-compete" tactics under the guise of protecting commercial secrets, infringing on employees' right to receive fair compensation and choose their employers freely.

A non-compete agreement is a bilateral agreement between two parties. The existence of such an agreement itself is legal. However, the existence of a non-compete agreement may also limit an employee's professional development and entrepreneurial freedom, especially if some non-compete agreements have overly harsh provisions that clearly exceed reasonable boundaries. Perhaps in some companies' eyes, non-compete agreements are indeed too "convenient" to use. As long as there is sufficient penalty, employees will think twice before trying to "skip out" on their obligations; even without giving them a raise or promotion, this can effectively restrict employee turnover. Some employers may adopt coercive measures when signing non-compete agreements, which further puts employees in a passive and weak position.

Legal provisions for restricting labor competition aim to protect employers' commercial secrets and intellectual property rights, allowing them not to face the cruel reality of former colleagues becoming competitors overnight. They also do not have to worry about leaks of commercial secrets or sensitive information. However, some companies are using non-compete agreements in an unbridled manner, unknowingly increasing the burden on employees leaving their jobs, deviating from the initial purpose of these agreements as a preventive measure to protect commercial secrets. Non-compete agreements have become a major "killer" restricting employee mobility. Therefore, it is essential to plug the loopholes in the system, clarify the definition of commercial secrets, and make regulations for signing non-compete agreements, both protecting truly confidential information from being infringed upon and preventing employers from taking advantage of ordinary employees to further exploit them.

This column article only represents the author's personal views.