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Non-competition Restriction refers to the restriction that prohibits an employee, within the agreed period after the termination of his or her employment, from taking a position at any other employer that has a competitive relationship with his or her original employer, or engaging in the same type of business on his or her own.

An enterprise may only conclude a non-competition agreement with its senior managerial personnel, senior technical personnel and other personnel subject to confidentiality obligations, and the term thereof shall not

An enterprise may explicitly specify confidentiality and non-competition obligations by signing a *Confidentiality and Non-competition Agreement* with its employees, including the scope, term and territorial scope of non-competition, as well as a list of companies to which employees are prohibited from providing services after the termination of their employment, among other contents. The aforesaid scope, term and territorial scope of non-competition shall be reasonable when weighed against the value of trade secrets possessed by the employee, otherwise the corresponding clauses may be declared null and void.

For employees subject to non-compete obligations, an enterprise shall pay economic compensation to such employees on a monthly basis during the non-compete period. Advance payment or lump-sum payment may lead to disputes over the nature of the paid funds. The enterprise shall also expressly specify the specific amount of economic compensation in the corresponding non-compete agreement. Where there is no such agreement, the enterprise may be required to pay monthly economic compensation to the employee at the rate of 30% of the employee's average monthly salary for the 12 months prior to the termination of employment, and the aforesaid economic compensation shall not be lower than the local minimum wage standard. In specific regions, separate provisions on the minimum amount of economic compensation may apply. For example, Jiangsu Province stipulates that the monthly economic compensation shall be one third of the employee's salary for the 12 months prior to the termination of employment, while Shenzhen Municipality stipulates that the said amount shall be one half of the employee's salary for the 12 months prior to the termination of employment.

Whereas both enterprises and employees are obliged to perform non-competition clauses, it is recommended that enterprises explicitly notify departing employees in writing regardless of whether they decide to enforce the non-competition agreement or exempt employees from their non-competition obligations. Where an employee has resigned and commenced performance of non-competition obligations, if the enterprise intends to terminate the non-competition agreement early, it shall pay the employee three months of non-competition compensation after notifying the employee thereof. Where an enterprise issues a notice prior to the employee's departure informing the employee that he/she is not required to perform any non-competition obligations after resignation, the enterprise shall not be required to pay any additional non-competition compensation.

An enterprise may also reach an agreement with its employees that, in case of any violation of the non-competition obligation by an employee, the employee shall pay the agreed liquidated damages to the enterprise and refund the economic compensation already disbursed. The amount of the liquidated damages shall be calculated in a reasonable and explicit manner in light of the employee's confidentiality obligation, non-competition obligation and the economic compensation obtained. Where the amount is excessively higher than the actual loss, it may be adjusted downward by the people's court or arbitration authority. Where an enterprise suspends the payment of non-competition economic compensation or claims for payment of liquidated damages, it shall possess evidence proving that after the termination of employment, the employee has committed a breach of contract by working for an entity engaging in similar products or similar business. The enterprise may require the employee to bear certain burden of proof by such means as stipulating that the employee shall regularly submit the employment certificate issued by his or her new employer.

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