In judicial practice, some enterprises have imposed indiscriminate competition restrictions on employees on the ground of protecting trade secrets, or imposed high liquidated damages to restrict employees from leaving. The judicial review of such abuse of competition restrictions will be further strict.
Both parties agreed on a 24 month non competition period, and the breach of contract must be compensated by 1 million yuan; The monthly salary of the employee during the service period is 45000 yuan, but the compensation is only 2590 yuan per month according to the Shanghai minimum wage standard, which is about 5.8% of the salary before leaving
This is a dispute case involving non competition recently issued by the Shanghai Second Intermediate People's Court. The court found that a technology company paid 30% of the employee Su's normal salary before leaving, that is, 13500 yuan per month, as compensation for non competition.
Su's experience is not an individual case. The issue of how to calculate the penalty and compensation for non competition restriction is reasonable, and the scope of non competition restriction is still the focus of controversy in such cases in judicial practice.
Some enterprises abuse competition restrictions by protecting trade secrets
Some scholars combed through 454 judgments on competition restriction disputes, and got the following results: 79% of the subjects of competition restriction obligations are "other personnel with confidentiality obligations", of which 77% are employees at grass-roots posts, such as product sales, front-line workers, security guards, etc; 87% of the judges confirmed or acquiesced that the non competition agreement was valid, and most workers took less than half of the basic salary of non competition compensation every month, but had to bear high liquidated damages.
"According to the legal provisions, the persons subject to non competition restrictions are limited to the senior managers, senior technicians and other personnel with confidentiality obligations of the employer. At the same time, the employer that believes that there is a need for confidentiality and non competition restrictions can sign non competition agreements with workers." The civil court trial team of Shanghai Second Intermediate People's Court assisted Chen Ying, the person in charge, to explain, "The law clearly stipulates that the maximum period shall not exceed two years."
Why is the non competition agreement with a clear scope of application abused in practice?
Li Huaping, a member of the legal advisory group of the Shanghai Federation of Trade Unions, believes that the main reason is the extreme protection of some enterprises' trade secrets. "If there is no obligation of non competition agreed by both parties, it is very difficult for employers to prove that workers have infringed on trade secrets." Li Huaping said, "In comparison, the burden of proof for violation of non competition is more convenient for employers. Therefore, some employers are willing to abuse the means of non competition to protect their competitive advantages."
In the process of technological competition, the "anxiety" of some enterprises to maintain their own leading advantages has expanded the competition restrictions, and even imposed indiscriminate competition restrictions on employees to protect trade secrets. In this regard, Chen Ying analyzed and said: "The relevant laws stipulate that the scope, region and duration of the competition restriction shall be agreed between the employer and the employee. In view of the fact that the specific content of the competition restriction is not legally necessary rights and obligations, the judicial review respects the autonomy of the parties, but the agreement on the competition restriction shall not violate the provisions of laws and regulations."
"For employers, unreasonable competition restrictions may lead to recruitment difficulties, increased brain drain and reduced reputation of enterprises, which is not conducive to long-term stable development of enterprises," Li Huaping said.
Substantive review is required to determine whether there is a competitive relationship
After receiving the award made by the Arbitration Commission, Wang Shan not only continued to perform the obligation of competition restriction, but also returned part of the compensation for competition restriction and compensated 2 million yuan as liquidated damages. Wang Shan refused to accept the arbitration award and sued to the court. In the first instance, it was decided that Wang Shan should still pay the former company's liquidated damages of 240000 yuan. The second instance of Shanghai First Intermediate People's Court held that, when judging whether a competitive relationship is formed, a comprehensive judgment should be made in combination with the company's actual business content, audience and other factors. In the final judgment, Wang Shan did not need to return compensation or pay liquidated damages.
The First Intermediate People's Court of Shanghai held that, as Internet companies, their business scopes often overlap when registering. If only based on this, it will obviously cause great obstacles to the re employment of Internet employees, especially software engineers, and great waste of social human resources. It also goes against the legislative intent of the competition restriction system. Therefore, when judging whether there is a competitive relationship, we should also make a comprehensive evaluation based on the actual business content and audience of the company. The provision of financial information services does not overlap with the provision of cyberspace for users to upload videos and communicate, so Wang Shan is exempted from compensation.
"The key to the problem is to accurately judge whether there is a competitive relationship between the original employer and the employee's self-employed or employed unit," Li Huaping said, "When determining, the arbitration department will make a comprehensive judgment on whether the actual business content, service object or product audience, corresponding market and other aspects overlap, rather than simply determining whether the business scope registered according to law overlaps."
"Similarly, the arbitration department takes substantive review on whether the workers' behavior violates the competition restriction, and examines whether the workers cover up the illegal purpose of competing behavior in a legal form, so as to achieve the balance of interests between employers and workers." Li Huaping added.
How to determine reasonable compensation and liquidated damages
In judicial practice, many employers calculate compensation based on the basic salary, and the compensation for competition restriction is significantly lower than the penalty for breach of contract. Although the agreement was reached by both parties through negotiation, the workers are often in a weak position in the negotiation. Chen Ying said that in practice, some enterprises abused competition restrictions in order to restrict the free flow of employee labor.
"Non competition restriction involves the balance between the employment right of workers and the autonomy of enterprise operation. At present, some employers, especially Internet companies, tend to generalize the non competition restriction. They do not consider the positions and responsibilities of employees, and restrict the resignation of workers by means of signing non competition agreement and high liquidated damages, which limits the right of workers to choose jobs freely granted by law," Chen Ying said.
Chen Ying mentioned that the Internet+Office no longer has too many restrictions on the content, region and time of employment of workers, and the scope of competition restrictions for workers should be limited to the same or similar business scope of employers. If it is expanded at will and harms the legitimate rights and interests of workers, the judiciary will review its rationality.
Li Huaping added that when the amount of liquidated damages agreed is obviously too high, the arbitration department will consider comprehensively the subjective fault degree of the worker's breach of contract, the standard of the non competition compensation paid by the employer, the length of the non competition period, the actual losses caused by the employer and other factors, and may reduce the amount of liquidated damages as appropriate.
How do workers protect their rights and interests when signing contracts? Chen Ying said that the terms should be read carefully when signing the contract, and employers can be required to clarify or explain the standard terms or terms with unclear rights and obligations. At the same time, when employing senior managers, senior technicians and other personnel with confidentiality obligations, the employer should also have a reasonable evaluation procedure. Only when it is really necessary after the evaluation, can it start the competitive restriction requirements for a specific small number of personnel to avoid the phenomenon of "generally starting competitive restriction on all employees" and "arbitrary competitive restriction" that does not comply with the legal provisions.
"Some new employers try to evade the obligation of competition restriction by covert means by guiding workers to establish labor relations with investment related companies and labor outsourcing companies, while some workers set up their own companies indirectly through their spouses, parents, relatives and friends or work in competing companies through labor dispatch, which is not recognized by the judiciary. The original employer may maintain its rights and interests and make up for losses by claiming that the worker should pay liquidated damages, and at the same time require the worker to continue to perform the non competition agreement. " Chen Ying reminded workers to pay attention to relevant issues and avoid violating the law without knowing it.
