Evidentiary Standards for Trade Secret Misappropriation in Labor Arbitration
PRC labor arbitration requires employers to prove contractual breach, asset confidentiality, and exact damages without statutory burden shifting.
Non Compete Agreement
Meaning
A contractual covenant restricts an employee from working for a competitor or starting a competing business for a specified period after leaving their current employer. Under Chinese labor law, a non compete agreement is legally enforceable only against senior executives, senior technical personnel, and other employees with confidentiality obligations. This contractual mechanism protects proprietary technology and corporate business secrets from being transferred directly to market rivals.
Compensation Obligation
A mandatory post-employment financial compensation must be paid to the departed employee for the restriction to remain legally valid. Under a non compete agreement, the employer must pay a monthly subsidy during the non-compete period, which is typically calculated as a percentage of the employee’s average monthly wage over the preceding year. If the employer fails to pay this compensation for three consecutive months, the employee holds the right to terminate the agreement and work for any competitor.
This financial requirement prevents companies from placing unfair restrictions on former staff without offering fair compensation.
Scope Limitation
A set of statutory boundaries restricts the duration and geographical reach of the post-employment covenants. Under a non compete agreement, the maximum duration of the restriction cannot exceed two years from the termination of the employment contract. The geographic scope and the range of prohibited business activities must also be clearly defined and limited to actual competitors.
Enforcement Remedy
A breach of the restriction by the former employee entitles the employer to demand liquidated damages and an immediate cessation of the competing activities. Under a non compete agreement, the employer must prove the breach before a labor arbitration committee to recover damages. These remedies help enforce corporate borders.