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Enforceability of non-compete under Chinese law

China non-compete agreement

As in other countries, non-competition covenants in China are seen as a restraint on trade and are not favored by the courts, particularly if drafted by the employer and not negotiated between the parties. Enforcement of non-competition clauses results in a balancing of the employer’s legitimate protectable interest(s) against the hardship imposed upon the employee by the restriction upon the employee’s ability to work. As experienced China lawyer in the field of non-compete agreement, we share our insights below.

There are two situations where a company typically encounters a non-compete: (1) when it has a valuable employee, information or contacts it wants to keep within the organization; and (2) when a new potential hire arrives with a non-compete that may restrict his/her ability to work for the company. In either case it is important to understand the fundamentals of how to use a non- compete agreement and when to avoid a potential employee who has one.

Consideration for non-compete

One indispensable component of an enforceable non-competition clause is that there must be adequate consideration for the employee to enter into the agreement. For a new employee, that consideration can be the job itself. Pennsylvania courts have uniformly determined that adequate consideration exists for restrictive employment covenants that are part of the formation of the employment relationship.


Pilot Employment Dispute Resolution and Wrongful Termination Compensation

Below is a news report on pilot employment disputes in China. Under Chinese law, pilot employment contract termination is not the same as other positions. There are specific regulation regarding how pilot employment dispute shall be settled and resolved. We are experienced in pilot employment dispute and have assisted several pilots and airline companies in their labor dispute matters.

Ten pilots on Friday said they had accepted a court ruling that they should pay compensation to China Eastern Airlines (CEA) to release them from their employment contracts.


An employment dispute more difficult than wrongful dismissal or several pay

This is one of my numerous employment law cases representing an employer in China. This case is more difficult than other employment disputes I handled, such as the wrongful dismissal or several pay cases.

My friend (let's call her "FRIEND") owns a tax preparation service  ("ABC Tax Services"). FRIEND's former employee (let's call her "FORMER EMPLOYEE") filed a false lawsuit against FRIEND in federal court.

Also named as a defendant is what we assume is intended to be her company but the plaintiff got the name wrong (let's say "ABC Tax Shinola").  The caption looks something like this:



Nature and Scope of China Labor Union Law


Below is a brief introduction of China labor union or China trade union law by China employment lawyer.

Unionization status

A few years ago, the state-sponsored All-China Federation of Trade Unions (ACFTU), the umbrella union for the entire country of China, called for all foreign-invested companies in China to recognize its unions by the end of 2008, claiming it would ‘blacklist’ and take legal action against any foreign firms refusing to allow unionization.

As of the beginning of 2009, according to official reports, 313 labor unions have been set up in 83% of multinational corporations’ China headquarters. The future of those companies that have not yet complied remains uncertain.

Historically, because government officials and corporate managers had a common interest in keeping production levels high, there was little official support for dissatisfied workers. China’s state-owned companies had unions under ACFTU, which as a government-affiliated body…is more interested in enforcing worker discipline.


How Foreign Nationals Working in China Participating Chinese Social Insurance Program

Below is the official regulation regarding how foreign nationals working in China participating Chinese social insurance system. It is highly recommended that you inquire us - we are China business lawyer - and clarify the difficulty in understanding this authority.

Interim Measures for the Participation in Social Insurance of Foreigners Employed in China

Article 1 The Interim Measures is promulgated in accordance with the Social Insurance Law of the People’s Republic of China for the purpose of protecting the legal rights of foreigners with employments in China to participate in and enjoy the benefits of social insurance.

Article 2 Foreigners with employments in China include non-Chinese citizens who legally apply and possess employment permits, such as Alien Employment Permit, Foreign Experts Certificate, Permanent Foreign Journalist Identity Card.

Article 3 Foreigners who are legally employed by enterprises, public institutions, social groups, privately-owned non-enterprise units, foundations, law firms and accounting firms which have been incorporated or registered in line with the laws in China are required to participate in basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. The employing units and foreigners should pay the social insurance premiums in accordance with relevant regulations.

Foreigners who entered into employment contracts with employers outside of China and are dispatched to work in branch or representative offices incorporated or registered in China are required to participate in basic pension insurance, basic medical insurance, work-related injury insurance, unemployment insurance and maternity insurance. The units to whom the foreigners work for and the foreigners should pay the social insurance premiums in accordance with relevant regulations.

Article 4 The employing units which hire the foreigners should be responsible for the registration of social insurance for the foreigners in accordance with the laws.

The units to which the foreigners are being dispatched to work for should be responsible for the registration of social insurance for the foreigners.

Article 5 Foreigners who participate social insurance meet the prescribed conditions should be eligible to enjoy the benefits of social insurance.

Where a foreigner departs China prior to the stipulated age for receiving pension, his or her individual account will be retained. Where the foreigner reenters China for employment, the payment period can be calculated cumulatively. Upon written application by the foreigner, the social insurance agency can pay the foreigner the amount in his or her individual account in one lump sum and terminate the basic pension relationship.

Article 6 Upon the foreigner’s death, the amount remaining in his or her individual pension insurance account can be inherited.

Article 7 Foreigners who reside outside the territory of China and receive monthly social insurance should produce to the agencies which handle their social insurance a Certificate of Alive issued by the Chinese Embassy or Consulate General, or a Certificate of Alive duly notarized by the authorized attesting organizations and legalized by the Chinese Embassy or Consulate General in the country where they reside.

Article 8 Foreigners, who participate in social insurance, has any dispute with his employing unit or work unit because of social insurance, can apply for mediation, arbitration and litigation. Foreigners may request social insurance administrative departments or social insurance premium collection institutions to deal with situations where their rights are fringed by the employing units or work units.

Article 9 foreigners who are nationals of countries that have entered into bilateral or multilateral treaties relating to social insurance with China, his or her social insurance participation shall be handled in accordance with such treaties

Article 10 The social insurance agencies should set up social insurance numbers and issue social insurance cards to the foreigners in accordance with the Rules on the Preparation of Social Security Numbers for Foreigners.

Article 11 The social insurance agencies should check and implement this policy.

If Employing unit is failing to pay social insurance premiums based the law, according to Social Security Law, "Labor Security Supervision Regulations" and other laws, The social insurance agencies shall have right to punish those units.

Article 12 The Interim Measures should come into force on 15th Oct 2011.

Interim Measures for the Participation in Social Insurance of Foreigners Employed in China is translated by our China international attorney. There may be independent local administrative regulations in this area.

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I am a licensed China lawyer. Most clients are foreign nationals and companies. China Lawyer Blog have associates in Beijing, Shanghai, Tianjin, Guangzhou, Suzhou, Nanjing, Qingdao, Fuzhou, Hainan, Hefei, Wuhan, Xian, Changsha, Xiamen and Hangzhou. Learn More

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This China Lawyer Blog is aiming at providing better knowledge and understanding of Chinese law for foreigners. Should you have any legal issue in China, do not hesitate to contact China Lawyer Blog for consultation. Preliminary consultation is free. Further legal service, however, will be charged in due rate and in due course.

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China Lawyer BLog AuthorPeter Zhu, an experienced China attorney licensed to practice law for more than ten years, the author of this China Lawyer blog, welcomes any enquiry or consultation related to Chinese law.