Nutshell
Tian is employed from Nov, 2013 by a cosmetics company and the two parties entered into a No Part-time Job for Serving Staff Agreement. Tian guaranteed that during his working time, he shall not be engaged in any business either self-running or for others. Breach of that, the company can claim five-month salary as damages and terminate the labor contract accordingly.
From April, 2015, Tian established his own cosmeceutical biology developing center with the business scope of cosmetic and hygiene commodity wholesale, wholesale biology technology consultancy, exchange, transfer and developing service. In Nov, 2015, Tian take the position of operation marketing manager of the cosmetics company, responsible of the Baidu branding work. He inserted the information of developing center in the branding information. The cosmetics company claim to the labor tribunal on the ground of non-competition for the damages of five-month-salary damages.from Tian.
Issue
Shall serving staff compensate if engaged in competing business?
Tian holds that the non-competition regulated in the Labor Contract Law refers to that the employees with non-competition obligation shall bear the responsibility within certain period after the labor relation is terminated. The law does not provide that serving staff shall bear non-competition obligation and pay damages.
The company holds that No Part-time Job for Serving Staff Agreement is legal and binding. Therefore the employee shall bear the duty of loyalty to the company. Tian takes the advantage of the current job for his own developing center. The behavior breaches not only the agreement but also occupational morality. Therefore he shall compensate the company.
Judgment
First trial holds that the No Part-time Job for Serving Staff Agreement is not a non-competition agreement therefore Tian bears no responsibility. The second trial holds that Tian breach the duty of the above agreement therefore he shall compensate the employer but the court adjusted the damages.
Comment by Lawyer Tang
This is a case on non-competition duty, the issue is on whether the non-competition duty covers the serving time.
Article 23 of Labor Contract Law stipulated that An Employer and a Employee may include in their employment contract provisions on confidentiality matters relating to maintaining the confidentiality of the trade secrets of the Employer and to intellectual property. If an Employee has a confidentiality obligation, the Employer may agree with the Employee on competition restriction provisions in the employment contract or confidentiality agreement, and stipulate that the Employer shall pay financial compensation to the Employee on a monthly basis during the term of the competition restriction after the termination or ending of the employment contract. If the Employee breaches the competition restriction provisions, he shall pay liquidated damages to the Employer as stipulated.
Non-competition mainly targets at separated employee in legal practice.
Shall the employees perform non-competition obligation on serving time? We think it shall be performed without agreed otherwise since loyalty is inherent in the job duty, but the damages shall be agreed upon otherwise.
In this case, Tian established a company running the same business as the cosmetics company and inserted the information of his own product in the Baidu branding of the cosmetics company. His behavior is a breach of the principle of faith and honesty and also the No Part-time Job for Serving Staff Agreement, causing a major damage to the lawful right and interest of the employer. The first and second trial counts hold the same stand on breach of non-competition. But the second trial court confirmed the non-competition nature inherent in the No Part-time Job for Serving Staff Agreement and ruled Tian to pay the damages based on his subjective malice. We hereby call on the professional loyalty and faith of employees.
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