Non-Compete Agreements in China: An Employer-Side Guide

October 6, 2026 · Jay Zhifeng Chen

This guide is written from the employer/company perspective and is intended for businesses operating or employing personnel in China.

A non-compete should protect a defined business interest through a restriction the company can justify and administer. It is not a default clause for every employee. Employers should review existing templates against the Labor Contract Law and the Supreme People’s Court’s Labour Disputes Interpretation II, effective from 1 September 2025.

Do not impose non-competes on everyone

Article 24 of the Labor Contract Law limits the relevant personnel to senior management, senior technical personnel and other staff with confidentiality obligations. Job title alone is not enough for a sound assessment. Under Interpretation II, Article 13, an employee who has not learned of or accessed the employer’s trade secrets or confidential matters relating to intellectual property may obtain a finding that the restriction does not take effect. Record the actual role, information access and reason for selecting the individual.

Identify the information being protected

Describe the relevant product, technical or commercial information with enough precision for an internal assessment, while avoiding unnecessary disclosure in the agreement. Keep access controls, confidentiality markings, permissions, training and exit records. A claim that all knowledge acquired at work is confidential does not distinguish protected material from general skills or public information. Non-compete drafting should follow the company’s information-protection work, not replace it.

Draft scope carefully

Connect restricted activities, competitors, territory and duration to the information the employee actually accessed. Article 13 of Interpretation II provides that an excessive part of a restriction may be invalid where it is disproportionate to the protected information. Under Article 24 of the Labor Contract Law, a post-employment non-compete cannot exceed two years. That ceiling is not a recommendation to use two years in every case. Avoid sweeping restrictions on unrelated occupations or markets where the company cannot explain the competitive concern.

Address post-employment compensation

Article 23 requires agreed monthly economic compensation during a post-employment restriction. Set the amount, payment method, schedule, contact details and administration responsibility before departure. Where compensation was not agreed and the employee performs the restriction, Article 36 of Interpretation I provides a judicial default of 30% of average monthly wages in the preceding 12 months, subject to the local minimum-wage floor. That default is not a universal rule validating every agreed amount: local requirements and the particular agreement still need review.

Under Interpretation I, Article 38, an employee may seek release where compensation has gone unpaid for three months for reasons attributable to the employer. Article 39 also addresses an employer’s request to end the restriction and the employee’s claim for an additional three months’ compensation. Do not assume that stopping payments alone is an orderly termination mechanism. Keep payment and release decisions documented.

Separate confidentiality from non-compete

Confidentiality governs use and disclosure of information; a non-compete restricts competing work or business activity. The duties, remedies and proof are not identical. Interpretation II, Article 14, separately addresses in-employment restrictions for the specified eligible personnel and rejects invalidity arguments based solely on the fact that they operate during employment or lack separate compensation. Do not use that rule to avoid post-employment compensation obligations.

Preserve evidence

Retain the signed agreement, protected-information assessment, access records, compensation payments and reliable evidence of the alleged competing activity. Collect evidence lawfully and proportionately; do not seek access to private accounts or systems without authority. Article 15 of Interpretation II addresses recovery of paid compensation and agreed liquidated damages for breach of a valid restriction. Validity, the scope actually breached and the available evidence must be assessed before making an enforcement demand.

Employer takeaway

Use a role-by-role approval checklist: eligibility, protected information, proportional scope, cost, payment ownership and evidence. At exit, decide whether to maintain or lawfully release the restriction, and coordinate HR, legal and payroll. A narrower restriction that the business can substantiate and fund may be more useful than a broad clause that is never administered.

Legal sources

• PRC Labor Contract Law
• SPC Labour Disputes Interpretation II (2025), effective 1 September 2025
• SPC Labour Disputes Interpretation I (2020), read with subsequent amendments

Legal review: 6 October 2026. This article provides general information only and does not constitute legal advice for any particular employment matter.

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