Don't Forget Employer's Duties When Drafting Non-Compete Clauses

A Beijing Court recently rejected an employer’s claim for RMB 300,000 for a former employee's breach of a non-compete agreement.


Employer and Employee signed a Confidentiality and Non-Compete Agreement, which basically stipulated that during the term of the labour employment and the effective period thereafter, Employee should not hold a part-time job or otherwise affiliate itself with a competitor or lure employees or customers away from employer (pretty general terms). The agreement did not however mention the Employees ‘rights’ or otherwise the Employer’s ‘duties’ with respect to the above obligation to not compete. Employee eventually left the position, and Employer paid Employee the non-compete compensation; but then appealed to the Beijing Arbitration Committee for the RMB 300,000 for the alleged breach. The appeal was rejected and the Employer brought the case to court.

The Court held....
In a Confidentiality and Non-Compete Agreement “both parties should be entitled to equal rights and responsibilities”. Since the agreement only stated the Employees responsibilities and failed to state the rights to which Employee is entitled to for compliance with its obligations, the contents of the agreement were deemed to be unfair and unbinding on the Employee. (Even though the Employer did infact remit the non-compete compensation)

Another example of how careful drafting can save the day.
* This is not legal advice