Some friends will be asked to sign a restricted competition agreement when they join a new unit. The agreement requires them to not join certain companies within a certain period of time after they leave their jobs. This has made it difficult for friends who are new to the workplace. Is it possible to sign or not?
Today I will help you sort out the key points of the restrictions on competition so that you can understand the rights and obligations of this agreement.
1. What is the restriction of competition?
restriction of competition originated from the prohibition system of directors and managers in the Company Law, mainly to prevent directors and managers from using their special status to harm the interests of the company. Many major economies in the world have similar provisions in the law.
However, in reality, many employees can still get in touch with business operations and technical secrets even though they are not executives. After these people switch to the company, they may cause damage to the production and operation of the original company. Therefore, in order to keep up with the pace of reform of the market economy, my country has also raised the restrictions on employee competition to the legal level:
Article 23 Employers and workers may agree in the labor contract to protect the employer's business secrets and confidential matters related to intellectual property rights.
For workers who are obliged to keep confidentiality, the employer may agree with the employee in the labor contract or confidentiality agreement to restrict competition clauses, and agree that after the labor contract is terminated or terminated, the employee will be given financial compensation monthly within the period of restriction of competition. If a worker violates the agreement on the restriction of competition, he shall pay the employer a penalty for breach of contract in accordance with the agreement.
——"Labor Contract Law"
2. Objects of restricted competition
0 Competition Agreement restricts the employment rights of workers, so the law makes clear provisions on the objects of restricted competition: they cannot be all employees, but must be senior management, senior technicians and other personnel with the obligation to keep confidentiality. Therefore, enterprises should make clear statements on the scope of personnel who are obliged to keep confidential in their rules and regulations.
Article 24 Persons subject to restrictions on competition are limited to senior management, senior technicians and other personnel with the obligation to keep confidentiality. The scope, region and term of the restriction of competition shall be agreed upon by the employer and the employee, and the restriction of competition shall not violate the provisions of laws and regulations.
After the labor contract is terminated or terminated, the limited period for the person specified in the preceding paragraph to go to other employers who have a competitive relationship with the unit that produces or operates similar products or engages in similar businesses, or to open up production or operates similar products and engages in similar businesses by themselves, and shall not exceed two years.
——"Labor Contract Law"
3. Scope of restriction of competition
The scope of restriction of competition includes industry scope and geographical scope. According to Article 24 of the Labor Contract Law (see citation above), the worker and the employer may agree, but shall not violate the provisions of the law.
4. The term of the restriction of competition
The term of the restriction of competition should generally not be too long, otherwise the enterprise will need to pay a large amount of compensation, which will be negotiated by the worker and the employer based on the value of the trade secret, competitive advantages, etc., but shall not exceed the statutory upper limit of two years (Article 24 of the Labor Contract Law, see citation above). If the competition agreement agreed by both parties exceeds the statutory period, the excess part has no legal effect.
restriction of competition is the right of the employer, so it can be waived. However, giving up shall not harm the interests of the workers. Therefore, if an employer needs to give up the remaining limited period of competition, he shall pay the economic compensation for the part of the agreement that has been fulfilled and inform the workers in advance.
5. Payment time and standard of economic compensation for restricted competition
Since the employer restricts the rights of workers, the workers should be given certain economic compensation. The Labor Contract Law stipulates that for workers who are obliged to keep confidentiality, the employer may agree with the employee in the labor contract or confidentiality agreement to restrict competition clauses, and agree that after the labor contract is terminated or terminated, the employee will be given financial compensation monthly within the period of restriction of competition.If a worker violates the agreement on the restriction of competition, he shall pay the liquidated damages to the employer in accordance with the agreement (Article 23, see above for reference).
The Labor Contract Law does not make any provision on the amount of economic compensation for restricting competition, and it shall be negotiated by the employer and the employee.
However, if the worker and the unit do not agree on the amount of economic compensation for the restricted competition in the restricted competition agreement and continue to perform the competitive agreement after leaving the job, the enterprise may be required to pay 30% of the average salary and not less than the local minimum wage standard. The law is as follows:
Article 6 If the parties have agreed on a restriction of competition in the labor contract or confidentiality agreement, but have not agreed to give the worker economic compensation after the termination or termination of the labor contract, the worker has fulfilled the obligation to restrict competition and requires the employer to pay economic compensation monthly at 30% of the employee's average salary in the twelve months before the termination or termination of the labor contract, the people's court shall support it. If 30% of the monthly average wage stipulated in the preceding paragraph is less than the minimum wage standard for the place where the labor contract is performed, it shall be paid in accordance with the minimum wage standard for the place where the labor contract is performed.
——"Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Laws in Trial of Labor Disputes Cases (IV)"
6. Liability for Breach of Contract of Restriction of Compete Agreement
If the enterprise fails to pay economic compensation to the worker in accordance with the restriction of competition agreement for more than three months, the worker may request the lifting of the restriction of competition agreement, or require the enterprise to continue to pay economic compensation.
Article 8 If the parties agree on restrictions on competition and economic compensation in the labor contract or confidentiality agreement. After the labor contract is terminated or terminated, the economic compensation is not paid for three months due to the employer's reasons, and the worker requests to terminate the restrictions on competition agreement, the people's court shall support it.
——"Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Labor Dispute Cases (IV)"
What needs to be explained here is: Even if the enterprise fails to pay compensation according to the agreement and the worker violates the competition agreement, the worker still has to bear the corresponding liability: pay the liquidated damages and compensation. If an enterprise fails to perform the agreement, it does not mean that the agreement is automatically invalid. Workers can hold them accountable in accordance with Article 8 of the Judicial Interpretation IV (see above for citation), but they cannot violate the agreement.
If the employee violates the restricted competition agreement, he shall bear the liability for compensation for losses in accordance with the payment of the liquidated damages (Article 23 of the Labor Contract Law, see above for reference). The employee shall bear the liability for compensation for losses incurred by the employer in violation of the provisions of this Law, or violates the confidentiality obligation or restricted competition agreed in the labor contract and causes losses to the employer.
——"Labor Contract Law"
If the employee violates the restricted competition agreement and has assumed the liability for compensation, it does not mean that the agreement is terminated or invalid, and the agreement shall continue to be performed until the end of the agreement period:
Article 10 If the employee violates the restricted competition agreement and pays a liquidated damages to the employer, and the employer requires the employee to continue to perform the restricted competition obligations in accordance with the agreement, the people's court shall support it.
——"Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Laws in Trial of Labor Disputes Cases (IV)"
7. The termination of the restriction of competition agreement
The first type is of course natural excessive, and the agreement will be automatically terminated after the expiration of the agreement.
The second type is that the company chooses to lift the restricted competition period, which is also possible. However, workers do not get better positions immediately after the constraints are lifted, so they can ask the company to pay an additional three months of economic compensation:
Article 9 When the employer requests to lift the restriction of competition agreement, the people's court should support it.
When the restriction of competition agreement is lifted, if the worker requests the employer to pay the employee an additional three months of restriction of competition economic compensation, the people's court shall support it.
——"Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Laws in Trial of Labor Disputes Cases (IV)"
The third situation is that the enterprise violates the restriction of competition agreement and fails to pay economic compensation for more than three months. The worker may request the lifting of the restriction of competition in accordance with Article 8 of the Judicial Interpretation (IV)".
Article 8 If the parties agree on restrictions on competition and economic compensation in the labor contract or confidentiality agreement. After the labor contract is terminated or terminated, the economic compensation is not paid for three months due to the employer's reasons, and the worker requests to terminate the restrictions on competition agreement, the people's court shall support it.
——"Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Trial of Labor Disputes Cases (IV)"
In short, whether the restriction of competition agreement is a two-way choice process for workers. If you mind being restricted by so many rules and regulations after leaving the job, you can not choose this job; if you believe that the profit is greater than the effort, then signing a legal restriction of competition is reasonable and a guarantee for the company.
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