PRC Employment Contract Law

Promulgated: June 29 2007
Effective: January 1 2008

Main Contents: The Law allows an employer to specify in the employment contract of, or a confidentiality agreement with, a worker who bears an obligation of confidentiality an anti-competition clause and monthly compensation for the anti-competition period after the termination or ending of the employment contract. If the worker breaches the anti-competition restriction, he/she shall pay the employer liquidated compensation as agreed.

Persons subject to an anti-competition restriction shall be limited to the employer's senior management personnel, senior technical personnel and other persons with an obligation of confidentiality. Once an employment contract is terminated or ends, the term of the anti-competition restriction that prohibits a person from serving with a competitor that produces or deals in the same type of product or engages in the same type of business as the employer, or prohibits him/her from opening his/her own business to produce or deal in the same type of product or engage in the same type of business may not exceed two years.