In recent years, employers have increasingly emphasized the use of non-competition measures to safeguard their own competitive advantages and lawful rights and interests, and such disputes have gradually entered the public eye. In order to lawfully protect employers' rights and interests in safeguarding trade secrets while also taking into account employees' freedom of career choice and promoting the formation of a fairer and more orderly market competition order, this morning (November 20), the Xuhui District People's Court of Shanghai (hereinafter referred to as the "Xuhui District People's Court") held a press conference to release the White Paper on the Adjudication of Non-Competition Disputes from 2020 to 2024 (hereinafter referred to as the "White Paper") and to brief the public on the Xuhui District People's Court's adjudication work regarding non-competition disputes in recent years.

At the press conference, Yin Xuexin, Vice President of the Xuhui District People's Court, and Xu Bin, Chief Judge of the Enforcement Adjudication Division, provided relevant information and answered questions from reporters. The press conference was presided over by Xie Meng, Head of the Political Department and Spokesperson of the Xuhui District People's Court. Central and local media outlets, including Legal Daily, The Democracy and Law Times, Jiefang Daily, and Shanghai Law Journal, attended the event. Some deputies to the Xuhui District People's Congress, the Xuhui District Federation of Trade Unions, the Xuhui District Labor Association, and representatives of enterprise employees were also invited to attend the press conference.

The White Paper notes that over the past five years, the Xuhui District People's Court has concluded a total of 105 cases involving non-competition disputes, with the number showing a year by year upward trend. These cases demonstrate the following characteristics:

first, the positions involved are both "high tech" and "high paying", with large amounts in dispute; second, there is an imbalance between liquidated damages and compensation, making dispute resolution more difficult; third, non-competition practices are concealed and diverse, resulting in a high proportion of findings of breach.

The White Paper analyzes the problems reflected in non-competition disputes and their underlying causes, which mainly include the following: the overbroad identification of personnel subject to non-competition obligations, leading to the frequent occurrence of non-competition disputes; the improper expansion of the scope of non-competition, impairing workers' right to free choice of employment; the imbalance between liquidated damages and compensation, unreasonably increasing the burden on workers; and increasingly concealed non-competition conduct, which heightens the difficulty for employers in collecting evidence.

With the accelerated advancement of technological innovation and intensifying competition for talent, non-competition, as an important mechanism for balancing the protection of enterprises' trade secrets and workers' freedom of employment choice, has seen its boundaries of application, determination of validity, and performance standards become focal and challenging issues in the field of labor relations.

To prevent the abuse of rights and maintain a fair employment order while lawfully protecting enterprises' legitimate rights and interests, the Xuhui District People's Court has focused on advancing the source prevention and substantive resolution of non-competition disputes from three aspects: first, promoting diversified co-governance and building a new pattern of front end dispute resolution; second, strengthening rule-based guidance to promote the unification of adjudication standards; and third, extending judicial services to empower new practices for enterprise development.

It is worth noting that, relying on the "Under the Gantang Tree" Community Judge Studio, the Xuhui District People's Court has developed the distinctive "Haiyan Mailbox" service brand, providing legal consultation, risk alerts, and mediation coordination both online and offline simultaneously. Judges are organized to visit key industrial parks and high-technology enterprises to gain a face-to face understanding of the pain points and bottlenecks in employment management and to provide tailor-made compliance recommendations. Circuit trial stations are established in industrial cluster areas, and circuit trial points are set up in comprehensive governance centers, using the "hearing one case" to drive the "standardization of an entire sector". Specialized training sessions are conducted for enterprises, systematically explaining the key points in the conclusion of non-competition agreements, the boundaries of performance, and the legal consequences, guiding enterprises to shift from "passive response to litigation" to "proactive compliance".

On this occasion, the Xuhui District People's Court selected five typical cases for release in the White Paper, presenting adjudication approaches to such cases from multiple perspectives, including the identification of the subjects of non-competition obligations, the determination of concealed non-competition practices, the determination of liquidated damages for breach of non-competition obligations, and the relationship between objections to compensation and the performance of non-competition obligations, thereby providing judicial guidance for the prevention and resolution of such disputes.

For example, in the non-competition dispute case of Sun v. Company B, it was clarified that establishing a company in the same industry prior to resignation and continuing its operations may be determined to constitute a violation of non-competition obligations. Similarly, in the non-competition dispute case of Liu v. Company E, the People's Court conducted a penetrating review and determined that conduct such as a third-party company paying social insurance contributions and salaries on behalf of the employee, with the employee in fact working for a competing company, constituted a violation of non-competition obligations.

The rule of law is the best business environment and a solid safeguard for the orderly mobility of talent. Going forward, the Xuhui District People's Court will continue to perform its adjudicative functions in accordance with the law and, through more proactive efforts, higher quality adjudication, and judicial services that are more closely aligned with the needs of the people, promote the steady and sustained development of the non-competition system within the framework of the rule of law, injecting stronger rule of law momentum into high-quality regional development.

Representative Comments

Wen Chenjing, Deputy to the Xuhui District People's Congress, Member of the Legal Affairs Committee of the Standing Committee of the District People's Congress, and President of the District Labor Association

The non-competition adjudication White Paper released by the Xuhui District People's Court systematically organizes judicial practice in recent years. With detailed data and representative cases, it possesses high instructional value. The White Paper accurately identifies the core points of dispute in current non-competition cases. The "fair and reasonable" principle it advocates and the "penetrating review" approach it promotes provide clear judicial guidance for balancing the protection of enterprises' rights and interests with the reasonable mobility of talent. This not only helps enterprises standardize employment management and prevent disputes at the source but also plays a positive role in fostering a sound and orderly market competition environment, reflecting the judiciary's sense of responsibility in serving and safeguarding high-quality economic and social development. It is hoped that the White Paper will guide all parties in building consensus and jointly promoting the harmonious and stable development of labor relations.

Shen Yanli, Deputy to the Xuhui District People's Congress, Director and Board Secretary of Shanghai Sunrise Polymer Material Co., Ltd.

The release of the White Paper on non-competition adjudication has played a positive role in promoting and optimizing the law-based business environment, and constitutes a constructive and forward-looking judicial innovation measure of the Xuhui District People's Court. Its positive significance is mainly reflected in the following three aspects: first, it transforms "passive adjudication" into "proactive guidance", demonstrating the innovativeness and forward-looking nature of judicial services; second, it achieves "two-way protection" for both enterprises and workers, is committed to building harmonious labor relations, and supports the high-quality development of enterprises within the jurisdiction; and third, through the precise output of judicial wisdom, it promotes the unification of law application and also helps to optimize the law-based business environment.