Answer: This question is essentially whether the scope of employees permitted by law to undertake the obligation of non-competition includes ordinary employees.
Article 24 of the Employment Contract Law stipulates that non-competition personnel are limited to senior managers, senior technicians, and other personnel with confidentiality obligations to the employer. Non-competition agreements signed by persons who do not have access to trade secrets and stipulating the obligation of confidentiality are of course invalid because they conflict the law.
Whether employees bear obligation of confidentiality depends on whether they have access to trade secrets. Generally speaking, general managers, chief engineers, technical directors, department technical directors, financial managers of company and the personnel who have access to the important business information and technical information of the company involved in these positions should all be the personnel who have access to trade secrets, so they all belong to the personnel with whom the employer can agree on a non-competition agreement. Ordinary employees who have no access to trade secrets are normally not personnel subject to non-competition obligation.
In the judicial practice of employment law, courts around the country adopt a formality assessment to determine whether the information contacted by employees constitutes trade secrets, and few cases adopt a strict, substantial way to examine the three characteristics of trade secrets, namely, non-publicity, commercial value, and confidentiality measures. This is different from the strict control of the general protection of trade secrets by the courts in the judicial practice. For example, in the case of Ge Jinhua before Sichuan Provincial High Court in 2015, the court held that the employee, as a front desk assistant of a plastic surgery hospital, had access to customer information, so she belonged to other personnel with confidentiality obligations. The court did not proceed a detailed analysis of the complex issues of whether customer information constitutes trade secrets.1Sichuan Xichan Plastic and Cosmetic Hospital Co., Ltd. v. Ge Jinhua Labor Dispute Case Sichuan Provincial People’s High Court Civil Judgment (2015) CMTZ No.408. The exceptional case is the labor dispute case of Duan Xuyang and others suing Xinjiang Meike Chemical Co., Ltd., the High Court of Xinjiang Uygur Autonomous Region, (2017) Xin Min Shen No.1888, in which the court held that whether employees as technicians were exposed to trade secrets needed to be identified by specialized agencies and that the case was remitted for retrial.
Some courts even presume that employee who on a confidentiality agreement belongs to the personnel bearing the obligations of confidentiality and non-competition, and require the employee to prove the opposite. For example, in the case of Tan Jianguang before Guangzhou Haizhu District Court in 2021, the court held that since the employee had signed confidentiality and non-competition agreements and he did not provide sufficient evidence to prove that he was not non-competition-related personnel, the court therefore rejected the employee¡¯s claim.2Qin Jianguang, Guangzhou Jianzhong Enterprise Management Consulting Co., Ltd. Labor Dispute Civil Judgment of First Instance Civil Judgment of Haizhu District People’s Court, Guangzhou City, Guangdong Province (2021) Yue 0105 Minchu No. 20406 and 20414. In the case, the employee claim that he was not a non-competition personnel, and the court held that since he had signed a confidentiality and non-competition agreement but failed to provide evidence to prove the claim. Therefore, the court rejected the claim.
Therefore, whether non-competition agreement signed by employer and ordinary employee is binding on the employee depends on whether the employee belongs to “other personnel with confidentiality obligations”. It is necessary to examine whether the employer has access to trade secrets and whether the related confidential information constitute real trade secrets.
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Mr. Dong Wang has been in practice for over 20 years, specializing in business law, including employment law, commercial law, company law, and intellectual property law. Mr. Wang has earned respect and trust from his clients due to his professionalism, fidielty, and kindness.
Email: wangdong@royalaw.com
- 1Sichuan Xichan Plastic and Cosmetic Hospital Co., Ltd. v. Ge Jinhua Labor Dispute Case Sichuan Provincial People’s High Court Civil Judgment (2015) CMTZ No.408. The exceptional case is the labor dispute case of Duan Xuyang and others suing Xinjiang Meike Chemical Co., Ltd., the High Court of Xinjiang Uygur Autonomous Region, (2017) Xin Min Shen No.1888, in which the court held that whether employees as technicians were exposed to trade secrets needed to be identified by specialized agencies and that the case was remitted for retrial.
- 2Qin Jianguang, Guangzhou Jianzhong Enterprise Management Consulting Co., Ltd. Labor Dispute Civil Judgment of First Instance Civil Judgment of Haizhu District People’s Court, Guangzhou City, Guangdong Province (2021) Yue 0105 Minchu No. 20406 and 20414. In the case, the employee claim that he was not a non-competition personnel, and the court held that since he had signed a confidentiality and non-competition agreement but failed to provide evidence to prove the claim. Therefore, the court rejected the claim.