In today's increasingly fierce business competition, non compete agreements have become an important means for enterprises to protect their trade secrets and competitive advantages. However, the signing and execution of non compete agreements are not smooth sailing, and there are many problems that need to be treated with caution. Below, we will delve into several common issues in non compete restrictions through a case study.

Case Review

A company is an automobile enterprise mainly engaged in the research and development of driving systems for hybrid trucks. Xiao Zhang is a clerk in the software development department of Company A. According to company requirements, all employees in the software development department have signed a non compete agreement with the company, which stipulates that if they resign, they will not be allowed to work in any automotive related companies for two years. Afterwards, Xiao Zhang resigned and Company A paid him a non compete compensation of 2200 yuan per month. About a year after leaving, Xiao Zhang joined Company B, which mainly produces driving systems for new energy ordinary cars. One day, Xiao Zhang received a subpoena, and Company A believed that Xiao Zhang had violated the non compete agreement and demanded that Xiao Zhang pay a penalty of 300000 yuan. Xiao Zhang believes that his previous job was only responsible for reception and administrative work within the department, and did not involve any technical content. And the professional field of the new company is completely different from that of the previous company. And I only received a compensation of over 50000 yuan, but I have to pay a penalty of 300000 yuan for breach of contract, which is very unreasonable.

Lawyer's analysis

Several common issues in non compete restrictions have been exposed in this case:

1、 Target audience for non compete restrictions

According to the Labor Contract Law, the personnel subject to non compete restrictions should be those who are aware of the company's trade secrets or intellectual property secrets. In practice, some units require ordinary employees such as sales personnel, front-line operators, or administrative staff to assume non compete obligations, which leads to the problem of expanding the scope of non compete restrictions. In practice, when it comes to whether an employee belongs to non compete personnel, the court usually first confirms that the unit does have trade secrets that need to be kept confidential and that the employee is indeed a person who knows the relevant trade secrets. If the above two conditions are not met, the non compete agreement may become invalid due to the non-compliance of the subject. For example, in this case, Xiao Zhang is an administrative clerk who does not have access to technology, so he should not belong to the group of non compete individuals.

2、 The competitive relationship between units before and after

Non compete restrictions are aimed at protecting a fair and orderly market competition environment, and employees should not enter units that compete with their previous companies after leaving. And whether there is a competitive relationship, the general court will judge the business content of the two units before and after, as well as the scope of trade secrets involved by the employees. The court will focus on verifying whether the actual business content of the two units before and after the review is consistent, whether the service targets are the same, and whether the audience scope of the products overlaps, based on the actual situation. For example, in this case, the court found through comparison that the oil electric hybrid system developed by Company A for freight vehicles and the electric drive system developed by Company B for ordinary cars have different market audiences and product installation targets, and the mutual substitutability between the two systems is not high. Therefore, it was ultimately concluded that there is no competitive relationship.

3、 Low economic compensation and high penalty for breach of contract

Employers use compensation to restrict employees' freedom of choice in order to gain potential business value and enhance the competitiveness of the enterprise. According to legal regulations, the monthly compensation for non compete restrictions shall generally not be less than 30% of the employee's average salary in the twelve months prior to the termination or termination of the labor contract, and shall not be lower than the local minimum wage standard. However, in practice, some employees already have low salaries and benefits in their original units, and the amount of non compete compensation they receive is also not high. For example, in this case, the employee received more than 50000 yuan in compensation during the two-year non compete period, but the liquidated damages were as high as hundreds of thousands. In practice, some courts believe that the commercial value obtained by the unit is much greater than the economic compensation obtained by the employee, or the liquidated damages paid by the employee are much higher than the compensation received. Such an agreement creates a situation of unequal rights and obligations. So in practice, there are also judgments by courts to increase economic compensation or reduce liquidated damages.

4、 Suggestions and inspirations

It is recommended that companies pay attention to identifying the identity of employees who are subject to non competition restrictions when signing non competition agreements with them, avoiding unlimited expansion of the target units of non competition restrictions, and ensuring the equality of rights and obligations of employees in the process of non competition restrictions. There are flaws in the non compete agreement to prevent signing.