The employer fails to pay the compensation for non-competition. Does the employer need to pay liquidated damages?

Shanghai | Beijing | Suzhou | Changsha | Nantong | Wuxi | Xuzhou | Zhengzhou | Xiamen | Nanjing | Hangzhou | Dalian | Jinan | Fuzhou | Guiyang | Qingdao | Chongqing | Huai 'an | Osaka | Fukuoka | Tokyo | Milan | Paris | Singapore | Berlin | Geneva

Edit comments/notes

In order to protect the business secrets of the unit, the employer usually chooses to conclude a non-competition agreement with the employee and stipulate the corresponding economic compensation for non-competition. However, if the unit fails to pay the economic compensation for non-competition, does the laborer need to bear the responsibility for breach of contract for non-competition?

Original authors | Fan Haiyun, Yang Shang

Related case

primary facts

On July 20 13, Lemou joined a bank as an account manager in the trade and finance department. The bank signed an eight-year labor contract with Lemou, and made it clear that its annual salary was 6,543,800 yuan. The labor contract stipulates confidentiality and non-competition clauses, stipulating that Le Mou must abide by the non-competition agreement, that is, he can't work in banking, insurance, securities and other financial industries after leaving his job, and the non-competition period is two years. At the same time, the two sides also agreed that Lemou should compensate the bank for 2 million yuan for breach of non-competition obligations.

On March, 2065438 1 day, the bank terminated the labor contract with Le Mou for serious violation of discipline, but it has not paid the economic compensation for Le Mou's non-competition. From 2065438 to February 2009, Lemou joined another local bank and still served as an account manager. 2065438+September 2009, the bank applied to the Labor and Personnel Dispute Arbitration Commission (hereinafter referred to as the Arbitration Commission) for arbitration.

Applicant requests

It was ruled that Lemou paid a penalty of 2 million yuan for violating the obligation of non-competition and continued to perform the non-competition agreement.

Treatment outcome

The arbitration commission ruled that the bank's arbitration request was rejected. If the employer fails to pay the economic compensation for non-competition within 3 months, the employee has the right to terminate the non-competition agreement. If the employee does not propose to terminate the non-competition restriction, but subsequently implements the non-competition restriction behavior, it is deemed that the employee proposes to terminate the non-competition restriction agreement by his behavior, and he does not need to bear the responsibility for violating the non-competition restriction contract at this time.

case analysis

If the employer fails to pay the economic compensation for non-competition, the dividing line shall be whether the unpaid period exceeds 3 months:

(1) If the employer fails to pay the economic compensation for non-competition for more than three months, the employee shall still bear the obligation of non-competition, and if it violates the obligation of non-competition, it shall bear the responsibility of non-competition for breach of contract;

(2) If the employer fails to pay the economic compensation for non-competition for more than 3 months, the employee may terminate the non-competition agreement according to law without continuing to perform the non-competition obligation. If there is any non-competition behavior, it is deemed that the employee proposes to terminate the non-competition agreement by his behavior, and he does not need to bear the responsibility for breach of the non-competition contract.

In practice, the employer may not pay the competition money in time for various reasons.

Restrict the economy

compensation

,

The author lists two common situations here:

1. Some employers have signed non-competition agreements with ordinary workers. When the workers demanded to pay economic compensation, the unit considered the agreement invalid, so they did not pay it. The main scope of non-competition restriction is limited to the senior managers, senior technicians and other personnel with confidentiality obligations of the employer. Namely:

However, in judicial practice, the employer claims that the non-competition agreement is invalid after the fact that the laborer has no confidentiality obligation, and generally does not support it. If supporting the employer's claim is invalid, you can also consider the reasons for the invalidity of the non-competition agreement and the loss bearing. Therefore, when signing a non-competition agreement, the employer should strictly examine whether the workers meet the conditions for signing, otherwise they will still face the risk of losing the case.

2. Some employers think that the trade secrets that workers actually contact are of low importance and have certain timeliness, so they don't pay directly. It is suggested that before an employee who has signed a non-competition agreement leaves his post, the personnel department and relevant departments should make an assessment according to whether the employee actually contacts with trade secrets and the length of contact. And decide whether to exempt the employee from the obligation of non-competition and whether to shorten the period of non-competition if the employee does not need to perform the obligation of non-competition after leaving the company, he shall inform the employee in writing at the latest on the date of leaving the company.

Legal link

Interpretation of the Supreme People's Court on the Applicable Law in the Trial of Labor Dispute Cases (1)

Article 38 The parties have agreed on non-competition and economic compensation in the labor contract or confidentiality agreement. If the economic compensation has not been paid for more than three months due to the employer's reasons after the labor contract is dissolved or terminated, the people's court shall support it.

Fan Haiyun

Xie Li Zhou Su lawyer office

Senior partner

Senior partner of Shanghai Shelley (Suzhou) Law Firm. Since practicing, I have long been focusing on the legal practice of labor law and marriage and family affairs. He is good at labor and personnel management, contract, internal corporate governance structure design and legal risk prevention, and provides wealth inheritance management for entrepreneurs. At present, he is a perennial legal adviser to dozens of enterprises and institutions, representing hundreds of labor litigation cases, and participating in a large number of non-litigation services such as business negotiation, credit investigation, personnel placement, non-competition restriction, employee incentive and legal training.

Lawyer Fan Haiyun is also a member of china law society, manager of China's wealth heritage, member of China Lawyers' Immigration Association, member of the Labor and Social Security Professional Committee of Suzhou Lawyers' Association, deputy director of the Civil Work Committee of Suzhou gusu district Lawyers' Association, and neutral juror of Suzhou gusu district People's Court.