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The employer signed a non-compete agreement with the employee, and the employee fulfilled the non-compete obligation in accordance with the requirements of the agreement after leaving the company. After the expiration of the non-compete period, the employee requested compensation from the employer, but the employer refused on the grounds that it had not notified the employee to initiate the non-compete obligation.
Under normal circumstances, as long as there is a non-compete agreement between the employer and the employee, both parties should perform the agreement, regardless of the form of the agreement. However, the agreement between Wang Qingming (pseudonym) and his company on this matter was not only complex but also contradictory, so much so that the parties disputed whether the non-compete agreement should be performed.
Wang Qingming believes that since a non-compete agreement has been agreed, he needs to perform it unless the company agrees that it will not perform the agreement. The Company argued that, according to the internal system, if it was required to perform the non-compete agreement, the company would give written notice, and if it did not receive the notice, it did not need to perform, and accordingly determined that it had not performed the non-compete agreement.
The court held that the employment contract stipulated that Wang Qingming was not required to perform the non-compete obligation without written notice from the company, and that Wang Qingming needed to perform the obligation within one year after leaving the company. Therefore, it should be determined that Wang Qingming has fulfilled the corresponding obligations. Accordingly, the Beijing Daxing District People's Court recently made a final judgment that the company should pay Wang Qingming 92,400 yuan in compensation for non-competition.
Whether the non-compete obligation is automatically activated
The company signed a labor contract with Wang Qingming, stipulating that his job position is sales and operation consultant, mainly responsible for financial credit business. Wang Qingming's monthly basic salary in the year before his resignation was 15,400 yuan.
On February 22, 2021, the two parties signed the Agreement on the Termination of the Labor Contract, which stated that the employment relationship between the two parties would be terminated by consensus on the same day, and Article 5 of the Agreement stipulated that all or part of the company's rules and regulations and the agreements signed by the two parties would not be invalid due to the termination of the employment relationship, especially the Confidentiality System and the Confidentiality Agreement. Article 6 stipulates that Wang Qingming undertakes to strictly fulfill the confidentiality obligation after the termination of the employment relationship......
In January 2022, Wang Qingming applied for labor dispute arbitration, demanding that the company pay him non-compete compensation.
Articles 35 and 38 of the labor contract submitted by Wang Qingming show that without the written consent of the company, Wang Qingming shall not engage in or cooperate with the company in competition with the company during his employment and within one year after his resignation, and shall not provide him with any consulting services or other assistance. Articles 40 and 43 of the contract indicate that the non-compete period is within the validity period of the employment contract and one year after the termination or dissolution of the employment relationship. If Wang Qingming takes up a post in a new unit during the non-compete period, he shall notify the company in writing within 5 working days from the date of appointment.
The company stated that the non-compete obligation in the employment contract was a regular clause, and the company did not notify Wang Qingming of the activation of the non-compete obligation when he left the company, so he was not required to perform the non-compete obligation. Therefore, its request for arbitration is not granted.
After the trial, the arbitration award company should pay Wang Qingming a non-compete compensation of RMB 92,400 for the period from February 23, 2021 to February 22, 2022.
The relevant provisions are contradictory
Dissatisfied with the arbitral award, the company filed a lawsuit with the court, arguing that Wang Qingming had been clearly aware of the company's failure to require it to perform its non-compete obligations. According to the company's regulations, before the employee resigns, the company will assess whether to initiate the non-compete obligation for the employee, and for the employee who needs to initiate the non-compete obligation, the company will sign the "Notice of Confidentiality and Non-compete Obligation" with the employee, and if the employee does not sign the notice, he is not required to perform the non-compete obligation.
Secondly, the employment contract clearly stipulates that Wang Qingming shall notify the company in writing when he takes up a position in the new unit during the non-compete period. If the employee has a non-compete obligation, it is a negative obligation not to work in a competitor's unit, and it is a positive obligation to actively report to the original employer that he has joined the new employer, both of which are important components of the employee's non-compete obligation. However, for a year, Wang Qingming worked for two employers, but never informed the company of his new employer.
Furthermore, during the non-compete period, Wang Qingming never claimed non-compete compensation. The reason for this is that it is aware that it does not have a non-compete obligation. If it asserts its rights in advance, the company will inevitably reiterate that it is not required to perform the non-compete obligation and that it will not be able to receive non-compete compensation for up to one year. It can also be seen from this that Wang Qingming used the procedural rules to seek the greatest improper benefits for himself.
Wang Qingming disagrees with the company's claims. He asserts that the parties signed a confirmation letter when they signed the termination agreement, which included a confidentiality agreement. The agreement stipulates that the employee shall perform the confidentiality obligation regardless of whether the employment contract is terminated or not. After leaving the company, he was unable to effectively contact the person in charge of the company, and his current work unit had nothing to do with the company's business.
Employees receive non-compete compensation
The court of first instance held that there was a dispute between the parties as to the method of initiating the non-compete obligation. The labor contract signed by the two parties stipulates that Wang Qingming shall not serve in any competitor engaged in business competing with the Company and its affiliates during his tenure of office and within one year after his resignation without the written consent of the Company. It can be seen from this that the company needs to inform the employee in writing that there is no need to perform the non-compete obligation, otherwise the employee is required to perform the non-compete obligation within one year after leaving the company. The company asserted that it did not notify Wang Qingming to initiate the non-compete obligation and therefore did not need to perform the obligation, but did not submit valid evidence to prove the claim.
Furthermore, the Company asserted that the parties had agreed in the termination agreement that there would be no more outstanding labor disputes and other economic disputes between the parties, but the Company did not deal with the non-compete restriction in the agreement, and the agreement stipulated that all or part of the Company's rules and regulations and the agreements signed by the two parties were not invalid due to the termination of the employment relationship, that the specific agreement was not clearly specified, and that the Company did not explicitly inform Wang Qingming that he was not required to perform the non-compete restriction. Based on this clause, Wang Qingming believes that it is reasonable for him to continue to perform the non-compete obligation after leaving the company.
In addition, the employment contract stipulated that the new employer should notify the company in writing within 5 working days during the non-compete period, and Wang Qingming did not report his work trends to the company, and the court held that the interpretation was reasonable because he could no longer use the company's internal contact software after leaving the company.
Based on the ascertained facts, the court of first instance ordered the company to pay him a non-compete compensation of RMB 92,400 on the condition that Wang Qingming had not violated the non-compete agreement. After the company appealed, the court of second instance rejected the appeal and upheld the original judgment.