There are many controversies in practice regarding the "decryption period" and related issues. How should employers agree on the "decryption period" to protect their legitimate rights and interests? This article interprets relevant regulations and cases.
What is the "decryption period"?
"Decryption Period" is also called "advance notification period". It refers to the period when the employer and the employee who knows the commercial secrets of the unit, before the labor contract is terminated or terminated, the employee notifies the employer in advance and the unit takes corresponding decryption measures before the labor contract is terminated or terminated. During this period, the employer can transfer the employee to other positions that are not confidential to ensure that the employee no longer contacts the employer's new business secrets. Regarding the concept of "decryption", in addition to the decryption of commercial secrets by enterprises, there are relatively clear provisions on the decryption of confidential personnel who have grasped state secrets in the "Conservation of State Secrets". The "decryption period" to be discussed in this article refers to the category of commercial secrets, and the secret refers to technical information and business information that is not known to the public, can bring economic benefits to the right holder, is practical and has confidential measures taken by the right holder.
The most direct provision on the decryption period is found in the former Ministry of Labor's "Notice on Several Issues Concerning the Movement of Employees in Enterprises" (Ministry of Labor [1996] No. 355). Article 2 of the notice stipulates that "when an employer and an employee who has trade secrets agree on matters related to keeping commercial secrets in the labor contract, it may agree to adjust his job position and change the relevant content in the labor contract before the termination of the labor contract or within a certain time (no more than six months) after the employee proposes to terminate the labor contract." However, due to the low effectiveness and long release time of this notice, many controversies and problems have emerged in actual applications. This not only led to some controversy in judicial practice, but also made many employers not aware of the existence of the decryption period, or how to legally agree on the "decryption period".
Main issues in practice
There are many controversies in practice about the "decryption period" and related issues, which mainly occur at the following levels:
1. Is the "decryption period" still valid now?
The dispute over whether the decryption period is valid is actually the dispute over whether the decryption period is valid for more than 30 days. The source of the dispute is Article 37 of the Labor Contract Law. According to this article, "Workers may terminate the labor contract by notifying the employer in writing thirty days in advance. Workers may terminate the labor contract by notifying the employer three days in advance during the probation period."
believes that Article 37 is a mandatory provision for protecting workers, regardless of whether the worker signs a confidentiality or not. Whether the commitment letter is in the deconfidential period and whether the corresponding confidentiality obligations are fulfilled in accordance with the agreement cannot be a reason to hinder the termination of the labor relations between the two parties and does not affect the termination of the labor relations between the two parties. The judgment of the Changping District People's Court of Beijing (2018) Jing 0114 Minchu 10259 and the judgment of the People's Court of Jinan High-tech Industrial Development Zone of Shandong Province (2016) Lu 0191 Minchu 2601 both hold this view, and the claim that the agreement on the deconfidential period is invalid on this grounds.
holds the view that the provisions of Article 22 of the Labor Law "The parties to a labor contract may agree on matters that keep the employer's commercial secrets in the labor contract" prove that the employer can agree on matters of deconfidential period. The provisions of Article 37 of the above are a right of the worker. Based on the principle that the right can be waived, if the worker signs a relevant agreement with the employer, it will be deemed to have waived the 30-day advance notice period for unilateral termination of the labor contract given by the Labor Contract Law, and the agreement on the deconfidential period is the true intention of both parties, and does not violate the mandatory provisions of laws and regulations, and should be deemed to be valid.This kind of view is held in the judgment of Shanghai Second Intermediate People's Court (2018) Shanghai 02 Minzhong 7189 and the judgment of Shandong Dongying Intermediate People's Court (2022) Shandong 05 Minzhong 326. The agreement on the decryption period is valid on this grounds.
After sorting out relevant regulations or documents on the detachment period in some regions such as Beijing, Shanghai, Zhejiang, Jiangsu, Liaoning, Ningxia, Qingdao City [1], it can be seen that these regions are supportive of the detachment period that does not exceed 6 months in principle. The author also tends to believe that the agreement on the decryption period of no more than 6 months should be valid, because the Labor Contract Law is to ensure that workers have no restrictions on their free right to choose a job, and stipulates that workers can terminate the labor contract by notifying the employer in writing 30 days in advance. However, protecting commercial secrets is a normal need for the development of enterprises. For some workers who come into contact with or master the commercial secrets of employers, especially senior managers and senior technicians, it is difficult for employers to complete all decryption measures in a short period of time by simply notifying the employer 30 days in advance. This is not conducive to employers and is not conducive to healthy commercial competition.
Therefore, employers may agree to a decontacting period with the worker, but in order to prevent the employer from abuse of rights, there are restrictions on the period of the advance notice period. This measure is a legitimate coordination of the rights and interests of both the employer and the worker, and its effectiveness should be recognized. The law does not prohibit the agreement on the decontacting period. Article 37 of the Labor Contract Law is not a mandatory regulation on the resignation period.
2. Can compensation be adjusted during decryption?
In current practice, after being transferred from the original position due to decryption, there are two views: salary adjustment and salary and benefits that cannot be changed.
's view that salary and benefits can be adjusted is believed that if the employer and the employee agree on a decryption period, the employee will enter the decryption period after resigning to the employer. During the decryption period, the employer can adjust the workers who know the trade secrets to other jobs that are not confidential and change the relevant content in the labor contract. Since the worker's job and work content have changed, according to the provisions of "salary changes with jobs", the remuneration obtained by workers during the decryption period should be consistent with the new position. For example, the judgment of Shanghai No. 1 Intermediate People's Court (2018) Shanghai 01 Minzhong 8168, the court held that it was not improper for the worker to resign on his own, Minsheng Bank Shanghai Branch arranged his work separately to perform the decryption period. Given that the decryption period is used by employers to arrange workers in confidential positions to get rid of confidential work and ensure information security, the nature of the work of the worker during this period is quite different from the original work, so there is no basis for the worker to require the payment of quarterly awards according to the original position standards.
argues that the salary and benefits cannot be adjusted, which believes that adjustments to salary and benefits are actually changes in major matters in the labor contract, affecting the legal and vital interests of workers. Moreover, if the de-secret period generally involves one month to six months, if the employer is supported to adjust the labor salary and benefits during this period, it will infringe on the legitimate rights and interests of the workers, and even the risk of malicious salary reduction by the employer. For example, in the Qingdao Municipal Human Resources and Social Security Bureau's "Opinions on Issues Related to Standardize Labor Relations" (Qingdao Human Resources and Social Security Rules [2020] No. 4), it is directly clearly stipulated that employers shall not reduce workers' labor remuneration.
We believe that if the salary and benefits are not clearly agreed in advance, the employer shall not unilaterally reduce the salary on the grounds of job adjustment, otherwise it is suspected of infringing on the legitimate rights and interests of workers and does not comply with the provisions of the Labor Contract Law on salary adjustment. However, if the amount or adjustment standard of the salary or adjustment standard has been clearly agreed in advance, this falls within the scope of autonomy of will. Unless the salary and benefits agreed in advance violate relevant mandatory standards or requirements, such adjustment or reduction shall be effective.
3. Can the decryption period and the restrictions on competition apply at the same time?
If the employer and the employee agree on the restriction of competition, whether the de-secret period can be agreed at the same time, different regions also have different attitudes:
Article 16, paragraph 2 of the Shanghai Labor Contract Regulations has clear provisions on this, "If the parties to the labor contract agree on the restriction of competition, they shall not agree on the advance notice period for the termination of the labor contract." This article stipulates that employers can only choose between the restrictions on competition and the 6-month advance notice period. However, in the judgment No. 125 of Shanghai Second Intermediate People's Court (2014), Shanghai No. 2 Middle School Min3 (Civil) Final No. 125, the court believes that the employer's two agreements are true expressions of intentions by both parties, so they are both valid.
The Jiangsu Provincial Labor Contract Regulations deleted the article "When enterprises agree on the terms of decryption period and the prohibition of competition clause, the decryption period will no longer be applied" after the revision in 2013, which is a relaxation of this point from the legislative level. In the judgment No. 2788 of Tongzhong Minzhong, the Intermediate People's Court of Nantong City, Jiangsu Province did not deny the situation where the employer and the worker agreed on the decontact period and the restrictions on competition at the same time. It can also be seen that the people's courts in Jiangsu have no restrictions on the double agreement.
We believe that although the restrictions on competition and decontact periods have the original intention of protecting the trade secrets of the unit, the legal application rules and specific adjustment norms of the two are not consistent, and the terms, treatment and obligations are different. The Labor Law and the Labor Contract Law have never prohibited the situation of decontact and restriction of competition at the same time. As the true intention of employers and workers, the judiciary should not restrict or interfere too much.
4. Can liquidated damages be agreed during the decryption period?
The current viewpoint for this issue is relatively unified, that is, the agreed liquidated damages clause is invalid. The Labor Contract Law only limits the situation where the worker needs to pay a liquidated damages to two situations: service period agreement and restricted competition agreement. Therefore, if the worker violates the provisions of the decontact period, the employer cannot directly apply the liquidated damages. Even if the liquidated damages clause is agreed, it is invalid and difficult to obtain support in practice. The judgment No. 125 of Shanghai Second Intermediate People's Court (2014) Shanghai No. 2 Zhong Min3 (Civil) Final No. 125 rejected the employer's request on the grounds that "the above-mentioned liquidated damages are inconsistent with the legal provisions, and the Ground Tong Company claims that the liquidated damages have no legal basis on this basis."
Recommendations for employers
In view of the current judicial status of the decryption period, we suggest that when enterprises make relevant constraints and implement decryption period agreements, they should pay attention to the following issues
1. The scope of applicable subjects for decryption period should be limited to workers who know or master the commercial secrets of the employer, so as to avoid applying it to all employees without any restrictions in order to prevent the high turnover rate of personnel, and avoid being in a form.
2. In principle, the length of the decryption period should not exceed 6 months
, but it does not require 6 months. Instead, it should be reasonably set in consideration of the specific circumstances of the confidentiality and scope of each position and employee. During this period, the employer can evaluate the work he was engaged in in his original position. If it is determined that there is no need for detachment, the detachment period can be terminated in advance.
3. Signing a separate decryption period agreement or terms
related agreements should comprehensively and in detail the basis of the decryption period, including the types of trade secrets involved in the employee position, the specific form of trade secrets, the scope of confidential information, etc., to enhance the rationality of the decryption period setting in written form. It should be noted that there are great risks only in the circumstances stipulated in the company's articles of association or unit system and it is difficult to obtain support from the court. If it is clearly stated through an agreement, it is easier to be recognized judicially.
4. A liquidated damages should not be agreed upon in violation of the deconfidential period, but the method and calculation standards of compensation liability should be agreed upon and the calculation standards
According to Article 90 of the Labor Contract Law, "If a worker violates the provisions of this Law, or violates the confidentiality obligation or restrictions on competition agreed in the labor contract and causes losses to the employer, he shall bear the liability for compensation." Therefore, the tort liability can be claimed from the worker, and the way to assume liability is usually to compensate for damages and continue to perform. Employers can refer to the provisions of the Anti-Unfair Competition Law to agree on the methods and standards for compensation for civil damages, and determine specific compensation liability from factors such as the research and development costs of commercial secrets, the benefits of implementing the commercial secret, the time when they can maintain competitive advantages, but it is recommended to quantify or agree on clearer calculation standards.
5, clarify the benefits, positions and other issues during the decryption period, and ensure that the procedures are legitimate
Employers try to maintain their original position and original salary as much as possible when performing the decryption period, and reduce disputes. If the job transfer is indeed transferred, it is recommended that the employer and the employee make an agreement in advance in the decryption period agreement, including the procedures and reasonable commitments for job transfer. The transferred positions and salary should be reasonable, and their salary should be paid in accordance with the adjusted job salary standards, and the employee himself will sign and confirm the transfer notice to clarify the rights and obligations of both parties.
6. If necessary, the restrictions on competition will be used to strengthen
Many controversies in practice show that the decryption period clause has no significant effect on preventing the leakage of trade secrets. Although the detachment period has a certain protective and deterrent effect, it is still slightly insufficient compared to the more clear and complete restrictions on competition. It is recommended that employers can sign additional restrictions on competition for strengthening.
[Note]
(1) "Regulations on the Beijing Labor Contract" (Beijing Municipal People's Government Order No. 91)
Article 18 When an employer enters a labor contract with a worker who needs to keep the employer's business secrets in accordance with the position requirements, he may negotiate and agree on an early notice period for the termination of the labor contract. The maximum period of advance notice shall not exceed 6 months. During this period, the employer may take corresponding decryption measures.
(2) "Shanghai Labor Contract Regulations" (Announcement No. 58 of the Standing Committee of the Shanghai Municipal People's Congress)
Article 15 For workers who are obliged to keep the employer's commercial secrets, the parties to the labor contract may make an agreement in the labor contract or confidentiality agreement regarding the advance notice period for the employee to request the termination of the labor contract, but the advance notice period shall not exceed six months. During this period, the employer can take corresponding decryption measures.
(3) Notice of Zhejiang Provincial Market Supervision Administration on Issuing the "Guidelines for the Protection of Trade Secrets"
Article 19 Decryption and Competition Restrictions
1, Use of the decryption period Employees who are suitable for decryption periods are senior technicians and senior management personnel who are exposed to commercial secrets and have core information on commercial secrets; the time for decryption periods is generally a few months before the employee requires resignation, retirement, or the unit believes that it needs to be transferred from his original position; the period for decryption periods should be comprehensively considered and determined based on factors such as the nature of the confidential matters and the degree of contact, and the maximum period shall not exceed 6 months; employees who are suitable for decryption periods still have the obligation to keep confidentiality for the commercial secrets they have already known after transfer, resignation or retirement.
(4) "Jiangsu Provincial Labor Contract Regulations" (Announcement No. 124 of the Standing Committee of the People's Congress of Jiangsu Province)
Article 27 For workers who are obliged to keep confidentiality, the employer may make an agreement with them on the advance notice period for the worker to terminate the labor contract and the job adjustment and labor remuneration during the advance notice period in the labor contract or confidentiality agreement. The advance notice period shall not exceed six months.
(5) Notice on Issuing the "Interim Measures for the Management of Labor Contracts in Liaoning Province" (Liaolai Shefa [2002] No. 48)
Article 13 When an employer enters a labor contract with a worker who needs to keep the employer's business secrets, he may negotiate and agree on an early notice period for the termination of the labor contract. The maximum period of advance notice shall not exceed 6 months. During this period, the employer may take corresponding decryption measures.
(6) Ningxia Hui Autonomous Region Labor Contract Regulations (Announcement of the Standing Committee of the People's Congress of Ningxia Hui Autonomous Region [2005] No. 20)
Article 18 The parties to the labor contract may agree on confidentiality clauses in the labor contract or sign a confidentiality agreement separately. Employers and workers who need to keep commercial secrets can agree on an early notice period for termination of the labor contract. The maximum period of advance notice shall not exceed six months.
(7) Qingdao Municipal Human Resources and Social Security Bureau's "Opinions on Issues Related to Standardize Labor Relations" (Qingdao Human Resources and Social Security Rules [2020] No. 4)
Article 19 When an employer and a worker with a confidentiality obligation to agree in the labor contract to keep commercial secrets and confidential matters related to intellectual property rights, it may agree to adjust his or her job position and change the relevant content in the labor contract within six months before the termination of the labor contract, but the employer shall not reduce the labor remuneration of the workers.
Author of this article : Shandong Wenkang Law Firm Lawyer Tian Bing and Wang Zhenjun
◆ Intern Ma Shiyu also contributed to this article.
