As experienced China corporate lawyer, we frequently encounter the situation where clients inquire about non-compete clause and even independent non-compete contract.
Non-Competition provisions restrict individuals and organizations from providing services or engaging in businesses in certain markets and geographies for a period of time. The enforceability of these clauses varies from State to State. The examples are taken from agreements covering matters broader than just non-competition, such as employment agreements, acquisition agreements or license agreements.
On January 31, 2013, the Supreme People’s Court of the People’s Republic of China, China’s highest court, released Judicial Interpretation on Labor Disputes (IV) (“Interpretation IV”). The Court had published a draft of the Interpretation for public comments in June 2012. However, there are major differences between the final interpretation and the draft, which is intended to balance the interests of the employer and employee.Employers in China are under a statutory obligation to compensate employees for observing non-compete obligations after termination of the employment. Until recently, it was uncertain how much compensation the employer was required to pay. Some local regulations provided for indicative percentages, but most did not.