CHINA Trends and Developments Contributed by: Linda Liang, Ai Luo, Faluan Pan and Chutian Wang, King & Wood Mallesons
the raised statutory retirement age to determine the Minimum Contribution Period. The FRS Interim Meas - ures made this point clear: • in determining the Minimum Contribution Period, the actual retirement date selected shall apply for employees opting for Early Retirement; and • for employees opting for Delayed Retirement, the date they reach the raised statutory retirement age shall apply. Summary To sum up, following the implementation of the Meas - ures and the FRS Interim Measures, China’s retire - ment policy has officially entered a new stage. It can be anticipated that more supporting regulations and rules will be released. Both employers and employ - ees are advised to update their practices regarding retirement accordingly, and to pay ongoing attention to relevant policies and judicial practices. Trends in judicial practice for non-compete labour disputes Driven by the increasingly fierce climate of market competition, employers are paying more attention to enforcing employees’ post-termination non-compete covenants, while employees are becoming more aware of their possible legal defences to protect them - selves from claims, leading to a more complicated dynamic in non-compete labour disputes. This complexity manifests in two key trends. On the one hand, non-compete covenants have been abused beyond the legally permissible bounds, extending to positions such as security guards, cooks and ware - house clerks, and even to all-employee coverage. On the other hand, there have been more and more high-profile non-compete-related cases between renowned companies and senior employees, involv - ing significant monetary claims. Under this context, heightened judicial scrutiny has been observed for non-compete labour disputes in practice. Legally permissible scope of personnel who may be subject to non-competes Non-compete agreements aim to protect the employ - er’s confidential information by placing reasonable restrictions on employees’ freedom of employment.
In this light, having access to the company’s confiden - tial information should be a precondition for setting non-compete obligations on an employee. Accord - ing to the PRC Employment Contract Law, personnel who can be subject to non-competes include senior management personnel, senior technical personnel and other personnel with confidentiality obligations. In defining “other personnel with obligations of con - fidentiality”, elements including but not limited to the nature of the position, work content and the possibility of accessing confidential information should generally be considered. In practice, the application of non-compete clauses is becoming increasingly widespread, and there are cases where the scope has been abused beyond the legally permissible bounds. In one typical case issued by the PRC Supreme People’s Court and the Ministry of Human Resources and Social Security, a security company, as the employer, filed a labour arbitration against an ex-employee who worked as a security guard and later joined another security company to work as a security guard. The company claimed that the employee breached his non-compete obligations. In response, the employee argued that, as a security guard, he had no knowledge of or access to the com - pany’s confidential information and thus should not be subject to non-compete obligations. The arbitration committee overruled the employer’s claims, holding that, considering the nature of this employee’s posi - tion and his main responsibilities (routine patrol), it is apparently difficult for this employee to learn confi - dential information of the company, and the compa - ny has no evidence to prove that the employee had access to its confidential information. The above case is not an isolated example. There have been other similar non-compete dispute cases filed by employers against ex-employees in positions such as cook and warehouse clerk, where the judicial authorities have overruled the employer’s claims on the same ground. It can be seen from the above cases that non-compete agreements can be deemed invalid and unenforce - able if the employer has no evidence to prove that the employee has access to the employer’s confidential information.
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