The simple answer is yes, China does recognize non-compete agreement and does enforce a non-compete agreement between a US company and its employees in China. However, under Chinese Contractual Labor Law, a non-compete agreement, to be enforceable, must be reasonable in scope and duration, and the employee must be reasonably compensated. A recent China Supreme Court interpretation indicates that one third of total compensation prior to termination is reasonable.
Many non-compete agreements include a choice of law clause and/or a forum selection clause. Whether this particular non-compete agreement is enforceable in China depends a lot of things. For example, under Chinese law, a non-compete agreement only applies to executives, senior managers, or senior technical staff who may possess trade secrets. A blanket non-compete agreement applicable to every employee would be too broad to be enforceable. Moreover, if the non-compete agreement was originated from California, which among several other states do not recognize non-compete agreement at all, except for some statutory exceptions, then the agreement is void ab initio. A Chinese court will not enforce it even though the agreement may be enforceable under Chinese law.
Further, besides non-compete agreement, companies often require an employee to sign confidentiality agreement, non-solicitation agreement, and trade secret protection agreement. These are enforceable under both Chinese law and US law.
To protect its products and intellectual property, the company would have to register trademarks, apply for patents and copyrights. That is only the beginning.
Many non-compete agreements include a choice of law clause and/or a forum selection clause. Whether this particular non-compete agreement is enforceable in China depends a lot of things. For example, under Chinese law, a non-compete agreement only applies to executives, senior managers, or senior technical staff who may possess trade secrets. A blanket non-compete agreement applicable to every employee would be too broad to be enforceable. Moreover, if the non-compete agreement was originated from California, which among several other states do not recognize non-compete agreement at all, except for some statutory exceptions, then the agreement is void ab initio. A Chinese court will not enforce it even though the agreement may be enforceable under Chinese law.
Further, besides non-compete agreement, companies often require an employee to sign confidentiality agreement, non-solicitation agreement, and trade secret protection agreement. These are enforceable under both Chinese law and US law.
To protect its products and intellectual property, the company would have to register trademarks, apply for patents and copyrights. That is only the beginning.
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