Is there a problem of expansion and even abuse of non-compete agreements? Investigative interviews by journalists

"I'm an ordinary salesman, which non-compete agreement to sign"

The reporter investigates the abuse of non-compete agreements by enterprises

■ Investigate motives

Recently, Mr. Tu, a reader, called to reflect the abuse of non-compete agreements by enterprises. Mr. Tu said that he was originally an ordinary employee of a major Internet factory, and when he left in February this year, he received a notice from the company to activate the non-compete agreement: the company compensated him more than 2,5000 yuan per month and restricted him from joining all enterprises in the same industry for one year. "Many colleagues, like me, are just ordinary employees of the company, not in the core department, and have no access to the company's trade secrets, and non-compete restrictions hinder our free choice of employment."

Is there a problem of expansion or even abuse of non-compete agreements? The reporter conducted an investigative interview.

□ Sun Tianjiao, reporter of this newspaper

Recently, Ms. Wang, from Chaoyang, Beijing, faced a dilemma – she was going to join a book company to do sales. The company's human resources department also carried a non-compete agreement when handing her the onboarding contract. According to the agreement, once she leaves the company, she is not allowed to enter the same type of company or competing (competitor) enterprise, otherwise she will have to pay liquidated damages of 10,<> yuan.

"I'm an ordinary salesman, which non-compete agreement to sign?!" Ms. Wang said that if she signed an agreement, she could not join the company, but after signing the agreement, there were hundreds of competing companies on the appendix of the non-compete agreement, and she would either pay high liquidated damages or change careers to non-professional work after leaving the company.

Ms. Wang has encountered such a problem.

The so-called non-compete restriction means that the Labor Contract Law stipulates that the employer may stipulate a non-compete clause with the employee in the labor contract or confidentiality agreement for the employee who has confidentiality obligations, and stipulates that after the termination or termination of the labor contract, the employee will be given monthly economic compensation during the non-compete period. If the employee violates the non-compete agreement, he shall pay liquidated damages to the employer in accordance with the agreement.

A reporter from Rule of Law Daily recently interviewed dozens of enterprise employees and a number of industry experts and learned that non-compete agreements are currently abusing. Some enterprises, especially some Internet and new energy enterprises, have extended the scope of non-compete restrictions to all employees, and the competing enterprises stipulated in the agreement include almost all enterprises in the same industry and their affiliates. This means that when an ordinary employee leaves, if the company enables a non-compete agreement, the employee can only choose to remain unemployed, change careers or pay high liquidated damages.

The interviewed experts believe that the law stipulates non-compete restrictions on employees, aiming to protect employers' trade secrets and intellectual property rights, but some enterprises abuse non-compete restrictions in a disorderly manner, which invisibly increases the burden of employees leaving the company, which has deviated from the original purpose of being a preventive measure to protect trade secrets, and this issue needs to be paid attention to and solved.

Sign a non-compete agreement upon onboarding

Regardless of position, no discrimination

Sentenced to pay 10,<> yuan, Joy (pseudonym) was remorseful: "Why did you agree to sign a non-compete agreement in the first place?" ”

Two years ago, Joey from Shanghai moved to a new education and training institution to continue his training work. Soon, she received a complaint from her "old employer", alleging that she had violated the non-compete agreement and demanded compensation to the company in accordance with the agreement.

According to Joy, when she joined the "old employer", the non-compete agreement was written in the employment contract of the entry, and signing the employment agreement was equivalent to agreeing to the non-compete agreement. At that time, she also wondered why she signed a non-compete agreement because she was an ordinary trainer, belonging to the teacher position, and had no access to the company's core technology and resources? What's more, the scope of non-compete listed on the non-compete agreement covers almost all training institutions, what should I do if I want to change jobs in the future?

"I also asked the company's human resources department at that time, and they said that all employees who joined the company were the same, and they had to sign a non-compete agreement." Joy recalled that at that time, in order to work, he also had a fluke mentality, feeling that as a teacher, he had a small number of student information, and the teaching materials he used were also general teaching materials, and even if he left in the future, it would not threaten and affect the company's operations, and the company might not "really compete" with the departing personnel, so he signed an agreement.

After she left the company, the "old employer" did not pay her non-compete compensation as agreed. After she joined the new education and training institution, the "old employer" sent someone to collect evidence of her training, made up the non-compete compensation that had not been paid before, and sued her and several other departing employees to the court.

In the end, Joy and others were judged for breach of contract, demanding to return non-compete compensation to the company, and compensate half of the liquidated damages stipulated in the contract, and Joy's compensation amount was 10,<> yuan.

Joy respected the court's decision, after all, she did sign a non-compete agreement, in black and white, but she always felt that she was pitted by the "old employer". "Is it really necessary for an ordinary employee like me to sign a non-compete agreement?" Joey said.

"According to the scope of non-compete defined in the non-compete agreement, after I choose to leave my job, I will either receive a low compensation and stay at home or change careers completely, but my past study and work experience are related to this industry, and it is simply unrealistic to change careers." Joy said that he is neither an executive nor a core employee of the original company, is it reasonable and legal for the company to impose indiscriminate non-compete restrictions on employees?

The reporter noticed that on social platforms, many netizens have similar experiences to Joy, and everyone complains that they are wrapped up in non-compete agreements, resulting in difficulties in reemployment, and their original positions include company finance, administrative staff, salespeople, etc.

A number of employees working in the Internet, new energy and other fields told reporters that the company required a non-compete agreement when they joined the company, "which is bound to the entry agreement." "If you transfer to a core department, or promote to a higher position, you can understand signing a non-compete agreement, but I am just an ordinary employee in a non-core department, why do I have to sign a non-compete agreement?" An employee of a new energy vehicle company said.

Yang Baoquan, a member of the Labor and Social Security Professional Committee of the Beijing Lawyers Association and a senior partner of Beijing ZhongYin Law Firm, believes that a non-compete agreement is a voluntary agreement between the two parties, and its existence itself is legal. However, the existence of non-compete agreements may also impose certain restrictions on employees' career development and entrepreneurial freedom, and some non-compete agreements are too harsh and beyond a reasonable scope. Some enterprises adopt coercive measures when signing non-compete agreements, putting employees in a passive and vulnerable position. These issues need to be addressed urgently.

Non-compete restrictions are alienated

Affect the benign flow of talent

In reality, disputes between employees and companies, or even between two companies, arising from non-compete restrictions, are not uncommon. The reporter searched on the China Judgment Documents Network with keywords such as "non-compete agreement" and "non-compete restriction" and obtained thousands of relevant information, and in many cases, the target was not executives, but grassroots employees.

In addition, some non-compete agreements express the scope of non-compete agreements very generally. Ms. Bai of Haidian District, Beijing, works in a testing institution, and on the non-compete agreement signed with the company she presents, the scope of non-competition covers: employees shall not engage in enterprises with the same or similar industries or work in enterprises that compete with Party B (i.e. the company) during the non-compete period, or shall not open a company that operates similar products or provides similar services with Party B; shall not provide any form of service for other enterprises, institutions and social groups that operate similar products or provide similar services with Party B; No advisory services (whether paid or not) or other assistance shall be provided to such competitive entities...

Shen Jianfeng, Dean of the Law School of China Institute of Labour Relations, said that non-compete restrictions are a system that exists to protect employers' trade secrets, and to prevent infringement of trade secrets by restricting employees' employment. But at the same time, it deprives workers of the freedom to choose a job and brings about a waste of human resources. Therefore, some countries or regions prohibit the signing of non-compete agreements. My country has taken the position of allowing agreements but limiting them. Such restrictions include restrictions on the groups of workers that can be agreed, limits on the length of the agreed period, requirements for payment of economic compensation, termination in the event of non-payment of economic compensation, etc.

"At present, in some places and industries, non-compete restrictions have indeed become alienated, deviating from the original intention of the system as a preventive measure to protect trade secrets, and there has been a generalization of non-compete restrictions and strict liability, which has become a way to restrict the departure of employees or employers to obtain bargaining chips with employees, affecting the benign flow of talents and the full use of high-quality talents and the development of industries with shortage of talents." Shen Jianfeng said.

During the interview, some interviewees reported that they had asked the company to sign a non-compete agreement because they had found a higher-paying job, otherwise they would not be issued a resignation certificate.

"The non-compete agreement is the result of consensus between the two parties, and should be an expression of the true intention of the parties, and when the employee does not agree, the non-compete agreement cannot be signed, and if the employee is coerced, the non-compete agreement is invalid." Shen Jianfeng said that issuing a resignation certificate is a legal obligation of the employer, and the law does not set preconditions for the issuance of a resignation certificate. If the employer fails to provide the employee with a written certificate of rescission or termination of the labor contract in violation of the law, the labor administrative department shall order corrections; If damage is caused to the worker, he shall be liable for compensation.

In Yang's view, in practice, the binding force of non-compete restrictions imposed on enterprises and employees is uneven, and the cost of rights protection is also quite different. In reality, there are situations where enterprises do not pay economic compensation or stop paying compensation in advance in accordance with the provisions of the non-compete agreement, and it is difficult for employees to protect their rights through legal means.

"Because from the perspective of enterprises, the failure of enterprises to pay compensation in accordance with the contract is a problem at the level of contract performance, not a problem at the level of contract validity. The failure of an enterprise to pay compensation for the breach of contract does not necessarily lead to invalidity. However, once employees are found to have violated non-compete agreements, they often face the risk of huge compensation, which may adversely affect employees' entrepreneurship and employment, making it difficult for them to change jobs or industries. Yang Baoquan explained.

Li Haiming, associate professor of the Central University of Finance and Economics, believes that the root cause of the abuse of non-compete agreements in practice lies in the fact that the provisions of the legislation are relatively vague and open, and "advanced" and "confidential" are vague words, which facilitates the broad application of employers; The standard of judicial adjudication is relatively lenient, and combined with the existing judicial interpretations, the judicial authorities do not strictly restrict the effect of non-compete restrictions, allowing general agreements on non-compete restrictions, so that non-compete restrictions have become a common clause in contract texts; The cost of employers abusing non-compete restrictions is relatively low, and "extensive" instead of "fine" has a cost advantage; Some workers are also willing to obtain financial compensation under non-compete restrictions, and they can often obtain low-cost returns through the benchmark rules granted by judicial interpretations.

Review of reasonableness, necessity

Improve legal normative restrictions

An employee of an Internet company told reporters that because of the inconvenience caused by non-compete restrictions to employees' departures, if they do not want to wait for a long time or compensate liquidated damages, some employees and companies have resorted to "extraordinary means" - the company that accepts employees subject to non-compete restrictions allows employees to join without their real names, or first names other companies that have no business connection with the original company.

"However, these operations may also cause employees to have difficulty paying social insurance, and being found out by the former company and being disadvantaged in litigation." The above employee said.

According to experts, the existing laws for the trial of non-compete disputes are mainly stipulated in the Labor Contract Law (amended in December 2012) and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (IV) (effective February 12, 2013), in which the parties agreed on non-compete restrictions in the labor contract or confidentiality agreement, but did not agree to give economic compensation to the employee after the termination or termination of the labor contract, and the employee performed the non-compete obligation. The employer may be required to pay monthly economic compensation at 2% of the employee's average salary in the 1 months prior to the termination or termination of the labor contract, and if 12% of the average monthly wage is lower than the minimum wage standard of the place where the labor contract is performed, it shall pay in accordance with the minimum wage standard of the place where the labor contract is performed. If the parties stipulate non-compete restrictions and economic compensation in the labor contract or confidentiality agreement, and after the termination or termination of the labor contract, if the economic compensation is not paid for three months due to the employer's reasons, the employee may request the termination of the non-compete agreement.

In Yang Baoquan's view, due to the rapid changes in industry development and technological progress, the existing laws and regulations have lagged behind the new changes brought about by the development of the industry, especially in emerging industries and high-tech industries, where the innovation and change of technology and business models are relatively rapid, and more specific and precise provisions should be made for the restrictions and application of non-compete agreements. In addition, some new occupations and work models, such as freelancers, sharing economy, platform economy, etc., have also brought new challenges and problems to the application of non-compete agreements, and relevant laws, regulations and judicial interpretations need to be further improved.

Shen Jianfeng believes that the current law restricts the application of non-compete restrictions to executives, high-tech and other personnel with confidentiality obligations. In practice, enterprises mainly change employees from ordinary workers to "other personnel with confidentiality obligations" by signing confidentiality agreements, so as to meet the conditions for signing non-compete restrictions. However, from the expression "other persons with confidentiality obligations" in the law, it should be a person who has a secret to be guaranteed in substance, rather than a formal agreement that can be decided. In order to prevent the expansion of non-compete agreements, the adjudication authority should introduce a review of the reasonableness of confidentiality obligation agreements.

"It should also be considered whether the choice of value orientation needs to be revisited. For large enterprises and platforms, there are many means to effectively restrict and restrict workers' non-competition, and the ability is very strong, which objectively improperly restricts the mobility and development of ordinary workers. The order of competition and the development of workers should be balanced, and the application of non-compete agreements should be appropriately restricted. Li Haiming said.

To this end, he suggested that the economic compensation of the employer using the non-compete restriction be strictly examined, and whether the employee's non-compete is necessary in the specific agreement, so as to establish the necessity standard of the non-compete restriction. At the same time, it should also be noted that many non-compete restrictions, especially some small and medium-sized enterprises, do not have the need for non-compete restrictions, but there are non-compete agreements, and it is difficult to prove the non-compete behavior of employees, which has led to cases in which workers claim non-compete compensation. In this case, the necessity of non-compete agreements should also be examined from the perspective of reducing unnecessary disputes.

Yang Baoquan suggested that according to the current situation on non-compete agreement dispute cases and the perspective of the implementation of enterprise non-compete agreements, the state can formulate clearer and stricter laws and regulations to regulate and limit the scope, time limit, breach of contract liability and other aspects of non-compete agreements, so as to protect the legitimate rights and interests of employees. At the same time, enterprises should continuously improve and adjust the provisions of non-compete agreements, and flexibly set the scope of restrictions, time limits and compensation methods according to the actual situation of the enterprise, so as to make them more fair and reasonable.

Before signing a non-compete agreement, an enterprise should fully communicate and exchange with employees, inform them of the specific content and scope of the agreement, listen to their opinions and suggestions, and let employees make independent decisions on a clear and informed basis. Enterprises should actively guide and advocate corporate culture and values, establish an open, inclusive and innovative image, reduce restrictions on employees' freedom of entrepreneurship and employment, and create good employee relations and corporate image, so as to enhance the competitiveness and attractiveness of enterprises.

"Workers should also continuously improve their personal legal knowledge and legal literacy, fully understand and evaluate the content of the agreement before signing it, and do not sign it blindly; If there is a non-compete obligation, you should avoid competing for the right company as much as possible to avoid the risk of default. Yang Baoquan said.

Comics/Li Xiaojun

(Rule of Law Daily)